Sunday, January 29, 2012

Zakaria: The end of an era for Japan



Wherever you are in the world, you've probably used or coveted some Japanese product - a Honda four-wheeler; a Toyota Prius, a Sony, a Panasonic TV, a Nikon camera. Since the 1950s, Japan's exports have flooded the world and fueled an economic miracle at home, making that country one of the wealthiest in the world. Well, this week marks a turning point - one of the world's great export engines has run out of gas.

What in the world is going on?

For the first time in 31 years, Japan has recorded a trade deficit. In simple terms, that means Japan imported more than it exported last year. Now this is not that unusual for some rich countries: the U.S. has had a trade deficit since 1975, and yet we've grown. But the U.S. economy is not built on exports. Japan's economic rise on the other hand, has been almost entirely powered by exports.

So what has changed in Japan?

The Japanese government would like to blame one-off events: Last year's earthquake and tsunami crippled factories and shut down nuclear energy reactors. The offshoot of that was decreased economic output, plus they needed to import expensive oil from the Middle East. But natural disasters have only highlighted and accelerated existing trends in Japan: A decline in competitiveness and an ageing work force. more