Exploring the causes of Japan’s 30-year stagnation—and possible ways forward

 In the 1980s, Japan was a global economic powerhouse. However, since the 1990s, it has experienced more than three decades of stagnation—a period now known as “The Lost 30 Years.” Often cited as a textbook case of long-term economic decline, this era has been the focus of intense academic and policy analysis.

 Yukio Noguchi, one of Japan’s leading economists, argues that the primary cause of Japan’s stagnation was not the collapse of the asset bubble, as commonly believed, but rather a deep crisis in its manufacturing sector. What led to this manufacturing downturn?

 The first major blow came in 1978, when China’s economic reforms propelled it to become the “factory of the world,” triggering a serious decline in Japan’s manufacturing competitiveness. The second challenge emerged during the IT revolution, with the rise of fabless companies like Apple and NVIDIA introducing a new manufacturing paradigm. Japan failed to respond effectively to these global shifts, and the stagnation deepened.

 In an effort to revitalize the economy, the Japanese government pursued a persistent weak-yen policy. However, these measures yielded little recovery. In 2000, Japan boasted the highest per capita GDP among G7 nations; by 2023, it had fallen to the bottom of the group. Noguchi warns that if this downward trend continues, Japan’s economic standing could fall below the OECD average.

 In this lecture, Noguchi offers a sharp analysis of the root causes behind Japan’s prolonged stagnation and presents concrete strategies for a new economic leap forward.