PRINT THIS PAGE

Reviving Japan's economy

Since 1990 Japanese GDP has grown by only 0.6 per cent compared with 1.7 per cent in the United States. This article from McKinsey Quarterly offers a detailed understanding and unique insights into the causes of Japan's decline and offers suggestions as to how to reverse this.

Since 1990, gross domestic product per capita has grown by a 0.6 per cent annually in Japan, compared with 1.7 per cent annually in the United States. As a result, the gap in GDP per capita between Japan and the United States widened from ten per cent in 1990 to over 20 per cent in 1999. Japan's unemployment rate rose from 2.3 per cent in 1990 to 4.9 per cent in 2000. In mid-1998, the unemployment rate surpassed that of the United States. Japan's government, once lauded for its masterful management of the economy, has only exacerbated these problems with futile attempts at a Keynesian stimulus. The country's debt-to-GDP ratio grew from 60 per cent in 1990 to nearly 120 per cent in 1999—twice the level of the United States and Germany.

The real causes of Japan's decline are not well understood. In fact, there is a real lack of detailed information about the performance of the Japanese economy at the micro level. To fill this information gap and to measure performance at the level of individual companies and industries, the McKinsey Global Institute recently completed a year-long study of the Japanese economy. The resulting detailed understanding of that economy not only provides unique insights into the causes of Japan's spectacular decline but also lays the groundwork for policies that would reverse the slide and cause Japan to grow again.

 Click to view the full article(free registration is required)

Extracted from The McKinsey Quarterly, 2000 Number 4 Asia 

The McKinsey Quarterly, a journal in print and online from McKinsey & Company, featuring the latest thinking on business strategy, finance and management.

Copyright © 1992-2001 McKinsey & Company, Inc.