The Future of "Old" Industry in Japan: Hollowing Out, Growing with Asia, or Switching to Services?

During the two “lost decades” Japan’s industry has been working as hard as ever. Companies had to adapt to the changing and decreasing demand of the ageing economy, work off inflated prices through cost-cutting, and jump from their mature growth markets (in the US) into emerging markets (in Asia). The success of the exercise is reflected clearly in the data: deflation has brought down producer prices to international levels; high paying manufacturing jobs for the old have been replaced by low paying service jobs for the young; emerging country exports are now three times higher than exports to the US; and the yen is among the strongest currencies in the world.

What had been “lost” during this workout, however, is the life-blood of growth and success: effective innovation, career opportunities for the young, global integration, and most forms of “future” investment. Will they return? Certainly. By looking at long-term (investment) trends, the presentation will show that Japan currently seems to be at a turning point from two decades of cutting back and restructuring to more future-oriented investment in domestic services and Asian markets. While taking a decisively positive perspective on Japan’s potential, however, it will also be shown which head winds of globalization are currently blowing in Asia’s increasingly competitive markets.

Martin Schulz is Senior Economist at the Fujitsu Research Institute (FRI) He is in charge of research and consultation on macroeconomics, finance, and corporate overseas strategies. Previously, Martin was a visiting researcher at the Bank of Japan and University of Tokyo, assistant professor of Economic Policy and Monetary Integration at Free University Berlin in Germany, and guest professor at a number of universities in Europe and Japan.