Last year, some of Japan’s key economic indicators surpassed their levels during the bubble economy era in the late 1980s.

They include land prices in Tokyo’s Ginza prime shopping district and the ratio of job offers to applicants. The benchmark Nikkei Stock Average rose to its highest close since 1992, although still far below the all-time high it registered at the end of 1989.

After the collapse of the asset price bubble, land and stock prices fell sharply and remained depressed during a prolonged period of asset deflation. The poor health of the real economy was reflected in a bleak employment picture.

Indicators of these vital signs of the economy have recovered to where they were before the bubble burst. But where exactly are we economically?


Ginza has changed its face dramatically in the past three decades.

During the era of soaring land and stock prices, Ginza, the capital’s renowned, upscale retail and entertainment hub, had a plethora of bank branch offices.

Since bank offices close at 3 p.m., their presence was “a negative factor” for the vibrancy of the town, says Eriko Takezawa, secretary-general of the Ginza Machizukuri Council, an association of store owners and business representatives to discuss issues related to the development of the district.

“At that time, our council handed a written request (to the banks) asking them not to pull down the shutter after their business hours,” she said, looking back on the go-go years.

Many bank branches in Ginza have been closed and replaced by stores of famous foreign luxury brands.

Many shops of fast fashion retailers and mobile carriers have also opened in Ginza, which now bustles with foreign tourists.

Riding on the wave of globalization, the town attracts people and money from all over the world.

The implications of job numbers are now different from in the past.

After years of languishing at low levels, the number of employed workers bottomed out in 2012 and increased by 1.85 million during the four years through 2016.

In the four years to the end of 1990, however, the number grew by 3.96 million, driven by the expansion of the population back then.

It was an era when there were many young people and even more jobs available to them. This is an era when businesses are competing against one another for the shrinking ranks of young workers.

Reforms of various systems have been made as well during the past three decades.

The financial system had to be revamped through drastic measures after it failed to tackle its bad debt problem swiftly.

The traditional “convoy system” of regulating the banking sector in a way that ensures the survival of all banks is long gone. The “main bank” system, in which companies maintain close, cooperative business ties with their leading creditors, has also weakened substantially.

A series of measures for deregulation has eroded the foundation of the “iron triangle” of politicians, bureaucrats and businesses.

Some time-honored companies have gone under as they failed to find new business models for the new era, while a bevy of startups have emerged as new corporate stars.

There have also been some radical policy moves. Following the collapse of the bubble, the government went on a public works spending binge to shore up the floundering economy. The Bank of Japan has introduced some bold new policy approaches for aggressive monetary easing in recent years.

While debate on the benefits and evils of these policy measures continues, few would dispute that the nation’s economic conditions demanded radical, even experimental, steps.


Despite all these policy efforts, however, there seems to be no signs of a positive shift in the business mind-set.

Despite racking up even more profits than during the bubble economy period, Japanese companies remain cautious about wage hikes and investment, showing a continued tendency to build up cash reserves.

Even if concerns about the effects of the shrinking population are considered, Japanese companies appear to be gripped by an excessively negative mind-set.

In a recently published research paper, Maiko Koga, an economist at the Bank of Japan, and others analyzed the investment behavior of Japanese companies in the post-bubble era.

The paper says companies that have experienced financing hardships tend to have lower estimates of their future growth and curb their capital investment and research and development spending.

The lasting impact of past traumatic events is called a “history effect.”

One example of a history effect is how workers who have lost their jobs fail to find an opportunity to develop their skills.

Estimates of the growth potential of the Japanese economy have remained below their levels in the mid-1990s.

The Japanese economy is now beginning to show performances in line with its growth potential. But there will be no acceleration of growth unless the potential itself rises.

The administration of Prime Minister Shinzo Abe has been stressing the importance of raising productivity. But its policy efforts have led to no significant progress so far.

It is vital to identify the factors that are hampering productivity gains.


For many years, Japanese companies have been obsessed with cutting costs, generating serious negative effects on wage and job growth.

Recently, however, a growing number of companies have opted to turn their non-regular workers into full-time employees.

Behind the trend are a labor shortage and the government’s efforts to promote reform of the way Japanese work.

But they are not the only factors.

“To ensure growth of the company amid rapid changes in the management environment, we should focus on the challenge of how to enable our employees to achieve their full potential,” says Kentaro Matsumoto, a senior executive in charge of strategic human development at Credit Saison Co., a credit card issuer that has given full-time positions to all its employees. “To accomplish this goal, we had better eliminate disparities in treatment of employees.”

Yoshihiko Miyauchi of Orix Corp., a consumer credit supplier, who was once the champion of shareholder value, recently told The Asahi Shimbun that people should not be treated like objects or money.

“People are different from objects or money and require maximum care,” Miyauchi said in a recent interview with the daily. “Economic activity exists to serve people.”

“We should pursue a society more focused on distribution in the coming years,” he added.

Japan has paid dearly for its three decades of poor economic performance. But it has also learned a lot from the experiences during the period.

If we become too optimistic and complacent, we will have to pay the price sooner or later. But we cannot open a new future for the economy if we remain daunted by failure.

It is important to boost efficiency to offer better products and services at lower prices and a faster speed.

But society as a whole will suffer if workers are not treated well.

Saying “striking a good balance is everything” sounds like a cliche. But we are facing a test of whether we have the will to endure this banality and continue adjusting ourselves to the changing reality while being conscious of the importance of pursuing both growth and better distribution.

Even if the Japanese economy finally emerges from deflation and comes to the end of the “post-bubble” tunnel, it will face unprecedented challenges posed by the rapid aging and shrinking of the population.

Japan’s presence in the world economy is waning, with room for additional fiscal and monetary policy maneuvering shrinking.

There is no doubt that rocky days lie ahead for the Japanese economy.

The only way it can deal with the tough challenges is through steady efforts to nurture new technologies and industries based on bitter lessons it has learned from its past painful struggles.

--The Asahi Shimbun, Jan. 4