South Korean media: Will Japan's "lost 30 years" become South Korea's future?
On July 13, the South Korean newspaper Seoul Economic Daily published an article stating that in December 1989, the Nikkei index reached 38,957 points. At that time, there were rumors that the land prices in the center of Tokyo exceeded the value of real estate across the entire United States. However, the massive asset bubble burst within a year, and Japan's economy failed to recover for 30 years. This period of stagnation is known as the "lost 30 years." What lessons should South Korea draw from Japan's "previous example" today?
Initially, it was called the "lost 10 years." However, low growth and deflation in the 1990s continued into the early 21st century and the 2010s. With the intensification of population aging and population decline, the domestic demand base weakened. Although the Japanese government repeatedly introduced economic stimulus measures, there was no substantial progress. Innovation was slow, and the existing structures centered on large corporations hindered the development of new industries. Eventually, Japan fell into the "lost 30 years."
The collapse of the asset bubble itself was not a crisis. Japan's economic confusion was not due to the bursting of the bubble. It was because of inadequate responses afterward and the delay in reforms. The government failed to promptly resolve bad debts, and companies concealed their losses, continuing to survive like "zombie companies."
The Japanese political circle chose stability over reform, and the public reduced consumption in the environment of deflation. Young people gave up fixed jobs and turned to non-fixed work, giving rise to the term "the generation of enlightenment." A silent, unambitious, and unwilling-to-move-forward generation emerged. This "failure of structural reform" and "psychological numbness" led Japan into a prolonged recession. In this process, the ladder of opportunities disappeared, personal aspirations declined, and the country lost its direction.
What about South Korea today? South Korea today is remarkably similar to Japan in the early 1990s. Real estate prices are falling from peak levels, household debt has reached the highest level globally, exceeding 105% of GDP, young people are struggling with unemployment, and the aging rate is faster than Japan's. The working-age population continues to decrease. The birth rate is at the bottom among OECD countries. Economic stimulus policies are frequent, but domestic demand recovery is sluggish.
The bigger issue is that South Korean society is well aware of Japan's past but still relies on old patterns. In the presidential election, the South Korean political circle focuses on short-term cash policies rather than fundamental reforms. Companies continue to struggle with various restrictions, missing investment opportunities while also struggling against the rapid advancement of Chinese companies.
Short-term economic stimulus is indeed necessary, but if it is not linked to long-term structural transformation, South Korea will only repeat Japan's old path. Especially in the early stages of an economic downturn, what is needed is not more public works or construction, but the improvement of the economic system and the establishment of an innovation ecosystem. Now may be the last chance.
Japan has shown South Korea something more terrifying than an economic crisis: the process of an entire society gradually giving up on change and becoming accustomed to fate. South Korea may also fall into the same trap. Similar warnings such as population reduction, high real estate prices, and weak domestic demand have already appeared.
Original article: https://www.toutiao.com/article/1837519799888075/
Statement: This article represents the views of the author.