Analyzing Economic Lessons: Japan Offers Insights on Thriving in a Low-Growth Era for Korea

Korea and Japan, despite their geographical proximity, have often been described as “close, yet far away,” highlighting the historical, political, and economic disparities between the two nations. However, recent economic data suggests that the two countries share more similarities than differences.

Cho Dong-chul, the president of the Korea Development Institute, notes that Korea’s current economic indicators closely resemble Japan’s, albeit with a delay of approximately 20 years. Both nations are grappling with challenges posed by an aging population and limitations on productivity growth, signaling an inevitable deceleration in economic expansion for Korea.

The International Monetary Fund’s (IMF) November report anticipates an average annual economic growth rate of 2.1 to 2.3 percent for Korea until 2028. Baak Saang-joon, an economist with extensive experience in Japan, views this growth rate as favorable for a developed country. He suggests that Korea should shift its focus from pursuing higher growth rates to enhancing the quality of the country.

Baak emphasizes that Japan’s experience offers valuable insights for Korea, particularly in addressing social issues arising from economic challenges. Japan successfully navigated issues such as housing insecurity, unemployment, and the depletion of pension funds by focusing on four key components: employment, housing, old-age support, and women’s careers.

The rebound in Japan’s fertility rate from 1.26 in 2005 to 1.42 in 2018, compared to Korea’s declining fertility rate from 1.08 in 2005 to 0.77 in 2022, highlights the effectiveness of Japan’s measures. Baak suggests that Korea can learn from Japan’s approach and shift its focus to enhancing internal stability, which is crucial for sustaining a 2 percent growth rate in a period of low economic growth.

Japan’s recent economic trends, marked by increased foreign investments and consumer spending, indicate a rebound. Despite being a super-aging society, Japan has addressed resource limitations through investments in research and development (R&D), including space and robotics. While Japan has ceded leadership in traditional industries to Korea and China, it remains strong in innovative sectors.

Baak sees opportunities for Korean companies as Japanese firms seek alternatives to reduce their dependency on China. Collaborations between Japanese and Korean companies could lead to significant opportunities, especially in industries such as energy, semiconductors, and tourism.

While acknowledging that Korea’s economic path will not mimic Japan’s, Baak underscores the advantage for Korea in learning from Japan’s experiences and making informed choices. As both countries reach their growth limits, economic cooperation could create synergies and expand market opportunities, fostering collaboration between Korea and Japan.

Stay informed with supply chain news on The Supply Chain Report. Free tools for international trade are at ADAMftd.com.

#KoreaJapanRelations #EconomicGrowth #AgingPopulation #IMFReport #QualityOverQuantity #CollaborationOpportunities #JapaneseExperience #KoreanEconomy #ForeignInvestment #ResearchAndDevelopment #EnergySector #Semiconductors #TourismIndustry #LearningFromHistory #EconomicSynergy