In the initial announcement of our tour, I said that Japan is facing the same challenges as other advanced economies, and in particular an aging population receiving high wages. I would like to back up this assertion with the latest available facts about the Japanese economy and the Japanese people, compared, for perspective, with the US, China, and Germany.
Later, I will zoom in on the manufacturing sector, and on the specific industries we are going to visit. But first, let us look at the country as a whole. Here is its overall GDP, growth rate, and Per Capita GDP:
International comparisons are always tricky, for several reasons:
1. The agencies collecting data on national economies do not use the same formulas. The figures are quoted from the CIA World Factbook, under the assumption that the analysts who crunch the numbers know how to make them consistent.
2. The currency exchange rates can mislead about the character of the economy. The banks’ rates are adequate for the power to purchase a global industrial product like an iPad. For that purpose, US$1 is worth the same in Shanghai and in San Francisco. But the same haircut may cost US$2.50 in Shanghai versus $100 in San Francisco. In terms of the power to purchase a haircut, US$1 in Shanghai is therefore worth US$40 in San Francisco. If you average this over a basket of goods and services, you get a Purchasing Power Parity (PPP) exchange rate with which you obtain numbers for GDP and Per Capita GDP that represent the way people live in better than bank exchange rates. There are, of course, many ways to do this, and there are goods or services that only exist in one country.
No matter how many grains of salt you take with these numbers, however, they confirm that Japan is economically much more similar to the US and Germany than to China. On the Japanese people, we have the following information:
In population, Japan is one and a half times Germany, and 40% of the US. Officially, Japan’s unemployment rate is lower than that of the other countries, but the definition of who is employed varies between countries.
The Gini index is the most commonly used measure of inequality of income or wealth in a society. The index quoted here is for income. It is 0 if everybody in the country receives the same income; 100 if all of the country’s income is collected by one individual. Worldwide, it ranges from 23 in Sweden to 63 in South Africa. This chart shows Japan as more unequal than Germany, but less than the US and China.
This table also shows that one in three Japanese has received higher education, which is almost the same ratio as Americans, and 50% more than Germans.
In terms of age distribution, the following population pyramids tell the story:
They don’t look like pyramids at all. Japan’s and Germany’s are more like trees, with a young “trunk” and a growing “canopy” of middle-aged and elderly people. China’s base has been narrowed by its one-child policy, but is likely underestimated due to the unregistered second children conceived in violation of this policy.
This is the background. Next, we need to take a look at the role of manufacturing in Japan.