Low Growth Trends in the Japanese Economy and Regional Vitalization Policy: From the Perspective for Mature Country

Myonwoo Lee

Senior Research Fellow, Sejong Institute

mwlee@sejong.org

Since the 1990's the Japanese economy has continued to show low or negative growth over the past 30 years, starting with the collapse of the bubble economy. Considering the economic growth up to the 1980s, this fall and long-term recession in the Japanese economy are very questionable. After the war, Japan responded wisely to crises and challenges and overcame them, as seen by overcoming numerous crises such as the ruins after the defeat and the oil crisis in the early 1970s, and such a strong image dominated.

This paper examines Japan's long-term loss and how to understand and review the revitalization policy, which the Japanese government has long focused on in relation to Japan's economy.

The following three hypotheses were proposed and reviewed regarding Japan's long-term recession. The first is the hypothesis that none or all of the four components, such as a close business cooperation system between the government and the loyalty of the employees to the company they belong to, are raised as the strength of the Japanese political and economic system. The second is that it has not been able to adapt to the environmental changes caused by the development of IT technology, which made remarkable advancements since the 1990s. These two explanations and aspects also link Japan's dysfunction to populism politics or lack of political leadership, cultural factors that value harmony. The third hypothesis is that low growth continues because policy management is promoted in the direction of improving the quality of life despite the low growth rate as a result of skepticism and reflection on growth policies.

The balance sheet recession theory as an explanation for Japan's long-term recession has turned into a debt pile as the bubble in loans, caused individuals weighed down by it to reduce consumption and continue to do so after repayment, and the vicious cycle of deflation continued as companies were reluctant to invest. However, this is a reasonable explanation for the decade of the 1990s but lacks explanatory power for the long-term recession after the 1990's. In this regard, Japan's failure to find growth engines such as digitalization suggested cultural factors that place more importance on face-to-face methods in terms of trust, such as the use of traditional stamps for administrative procedures, or political factors that are lukewarm for fundamental restructuring.

The national theory, which emphasizes quality rather than quantitative growth, was also raised in the period of the ultra-low growth era after the 1990s, which was also considered to have played a part in vitalization policy. Hence, the background of the introduction of the local creation policy and its success stories were briefly reviewed under this connection. The Japanese economy's ultra-low growth trend is a combination of social problems such as low birth rates, aging, and local extinction and cultural factors that resist digitalization, along with the aforementioned balance sheet recession. It was the local creation policy under the vision of Society 5.0 that attempted to respond to digitalization, low fertility, and aging issues by presenting the goal of revitalizing the region.

Although the results of this promotion are still insufficient, but as a policy suggested to promote growth policy, it is necessary to comprehensively consider the problem of low birth rate, aging, and extinction of the local community, as well as the problem of overcoming Tokyo centralization. In this respect, I tried to find implications for Korea.​