The State of the Economies: An Overview and Outlook for the UK and Japan

As 2008 marks the 150th anniversary of diplomatic and commercial relations between the UK and Japan, this year-long seminar series takes as its theme the relationship between the economy and society in the two countries. Reflecting on the pattern of post-war economic development and the lessons of rapid economic growth, the series will consider more recent changes in the economic environment and measures to address the gap between the rich and the poor. Individual seminars will focus on the engines of wealth creation and the growth of enterprise culture; the impact of corporate restructuring; the inexorable rise of London and Tokyo; the issues facing regional economies; and the global context of economic change.

 

This first seminar in the series set the scene and provided a context for the full 2008 programme by offering an overview of the British and Japanese economies and an outlook for the future.

Summary

Masato Takaoka, Economic Minister at the Embassy of Japan in the UK, gave an analysis of the Japanese economy. He addressed Japan’s ‘Lost Decade’ of the 1990s, stating that companies suffered from excess in capacity, employment and debt. Since 2002, however, falls have been seen in excessive capacity, over-employment and non-performing loans. Consequently, industrial production and company profits have been increasing. New challenges are those of the declining labour share of the population (due to the retirement of baby-boomers, the replacement of regular with non-regular workers, and the lag in the growth of salaries compared to profits); the current financial instability; the rise in crude oil prices; and the negative impact of the Revised Building Standard Law.

 

Steady growth in the future will be characterised by a declining and ageing population that is more prepared to work beyond the traditional retirement age; increasing foreign direct investment; and a greater prevalence of mergers and acquisitions occurring outside company groups.

 

Paola Subacchi, Head of the International Economics Programme (IEP), Chatham House, gave an overview of the UK economy and its place in the world. She said that the UK has benefited from globalisation but vulnerabilities in productivity, low saving and personal indebtedness could make for a bumpy ride in the short term. The UK economy saw the strongest growth in 2007 and is predicted to perform well in 2008 and 2009. In terms of GDP per capita, the UK’s performance currently outstrips those of the US, the Eurozone and Japan. The tipping point for the world’s leading economies was the mid-1990s, when Japan and the Eurozone fell behind the UK and the US with their strong domestic demand. The sectoral change in the UK employment has been marked: between 1985 and 2005, jobs in services – especially in government, distribution and business services – have risen at the expense of those in more traditional industries.

 

In facing the challenges of personal debt, over-reliance on the property market, budget deficits, and increased competition in growing markets, the UK could face some problems but the British companies are financially strong and the economy should be able to prosper.

About the contributors