With all eyes on the debt crisis engulfing America and Europe, few have noticed the depths to which Japan’s once-triumphant economy has sunk. With Tokyo reduced to wringing its hands, could Japanese economic dominance be dead in the water?
In many ways, the Japanese economy is like a processed fish – caught, dried out, frozen, and now having great chunks of value sliced clean off.
Take the seafood industry. Japanese sushi shops rake in about $17 billion annually, with hungry customers consuming nine million tons of seafood along the way.
It is an addiction which has spread all around the world. But it is not helping its main exporter, which has been left floundering.
“Japanese food is the most popular food in the world, and definitely, I think there are many other companies like ours doing the same business,” says Yoshiharu Takagi, a managing director of the Mutual Trading Group. “And everywhere, I think, these companies are suffering major consequences from a strong yen.”
When the national currency is up, it pushes exports down. Japanese goods are just too expensive to compete on the world stage. And as profits disappear, so do people’s livelihoods.
Stagnant growth, the strong yen, and a massive national debt – some economists fear that Japan may only be a few years away from its own major economic crisis. And since this East Asian nation remains the world’s number three economy, the consequences of a meltdown would be global.
This is something Japan’s political leaders are determined to avoid, and many are calling for urgent action.
“Japanese industry can probably endure the current 75-yen-to-the-dollar level for a little while,” says House of Councillors member Yoichi Kaneko. “But if this situation doesn’t change over a longer period, I think we’re going to see Japanese factories and large companies move their operations overseas – to places like Vietnam, Thailand, or China. This would lead to a hollowing out of Japanese domestic industry and create unemployment. Japan is facing an extraordinary economic crisis.”
Despite deep concern on the part of the country’s leadership, it is far from clear what the Japanese government can really do to prevent the soaring yen from leaving Japanese businessmen starved of money.
“In Japan, the linen supply industry is gradually losing its ability to sell its products,” says Masahiro Iida, the president of Asahi Seisakusho Co. “The machines too just aren’t selling… Since the world faces these conditions, Japanese companies have to look for whatever opportunities they can discover.”
But that is not going to be easy in a country where the government itself is deeply in the red. Japan has the highest national debt among major economies, owing almost twice as much as the economy makes in an entire year.
Couple that with the funds needed to rebuild after the devastation unleashed by the earthquake and tsunami earlier this year, and it seems Japan is fighting a battle it may not be able to win.