Japan has been stuck in secular stagnation for the last two decades. Low female participation in the workforce, strong household emphasis on savings over consumption and rigid labour market policies all constrain current and future economic growth. The economy grew 1.1% in 2018, but is expected to expand around 0.6% p.a. over coming years. Prime Minister Shinzō Abe has pushed through policies to revive the economy. The set of policies, known as Abenomics, include accommodative monetary policy, fiscal stimulus and structural reforms. So far the polices have been successful at propping up asset prices and weakening the yen. But a weaker yen will not be enough for Japanese firms to compete against their lower cost competitors across Asia.
Weak economic growth has stunted Japan’s per capita income. Japan’s per capita income was 6% higher than that of the US in 2000, fast forward 18 years and Japanese incomes are now 36% lower than that of the US. Japan’s ridged labour laws have made income inequality more of an issue as the wealth gap widens between the established, wealthy older generations and the poorer youth. Per capita income GDP is expected to pass US$47,500 by 2023.