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  • In 1987, Donald Trumpwho was then  a flamboyant millionaire ran full-page ads

  • in the New York Times, the Washington Postand the Boston Globe criticizing Japan

  • for its trade imbalance  with the United States.

  • Japan's economy was then the envy of other nations,

  • rising from the ruins of World War II to   become the world's second-largest economy.

  • Many Japanese seem to be so busy from Monday to Saturday making electronic goods,

  • there's only one day left on which they can actually go out and buy them.

  • All that came to a halt in the 1990s  when it started experiencing a prolonged recession

  • which economists have dubbed The Lost Decade.

  • In the years sinceJapan has experienced sluggish growth under a "revolving doorof prime ministers.

  • Despite attempts by Shinzo Abewho was Japan's longest-serving Prime Minister,

  • to revive the country's economy, poverty is on the rise.

  • So, can Japan escape   its prolonged economic slump?

  • After about two decades of economic stagnation,   Abe's second term as  prime minister

  • brought hope that he could steer the country, out of recession.

  • By then, China had overtaken Japan to  become the world's second-largest economy.

  • To tackle the stubborn economic stagnation and low inflationAbe introduced his

  • signature economic policies  known as “Abenomics.”

  • These came in the form of monetary easing,   fiscal spending and structural reforms

  • of Japan's labor force,   which was shrinking and aging.

  • Japan has been facing a population decline  since 2011 because of a low birth rate.

  • In 2019, there were around  500,000 more deaths than births,  as the number of babies born fell by 5.9% .

  • With an aging population and a shrinking workforce, unemployment levels have been low.

  • Despite a tight labor market, the earning power of Japanese workers has remained stagnant.

  • In fact, the average wages in Japan has remained  below $40,000 since 1991

  • unlike other developed countries   such as the United States and South Korea.

  • This has its roots in  Japan's  peculiar employment system,

  • which is built on a set of principles to promote loyalty between employers and employees.

  • Employees sign long term contracts  with companies and are motivated

  • to remain because of a wage structure  that prioritizes seniority over merit.

  • This practice, known in Japanese  as Shushin Koyo, dates back

  • to World War II and has become ingrained in the Japanese culture, especially in larger companies.

  • While this scheme made  sense in the post-war period,

  • when there was a shortage of skilled labor,

  • this relatively stable but rigid employment system led to

  • an emphasis on job securityrather than productivity and performance.

  • As a result, Japanese firms   were reluctant to increase

  • employees' salaries,  especially during economic downturns,

  • because they were expected  to retain their employees for a long period.

  • Japan's aging population  also meant that senior

  • executives were unlikely   to move anytime soon,

  • providing little to no career progression and wage increases for younger employees.

  • To address these labor woesAbe tried to reform the

  • country's labor systemsuch as relaxing immigration laws,

  • easing Japan's brutal work culture and encouraging more women to join the workforce.

  • While Abe managed to increase female participation in the workforce

  • to an all-time high  many were on low-paying odd jobs.

  • Among senior and leadership positionsonly 15% were held by women,

  • while Japanese women earned about half of what men got on average.

  • Besides deeper cultural issues  in a patriarchal society,

  • the lifetime employment scheme   also discouraged firms from

  • hiring women into the workforce full time to avoid commitment costs such as pension funds.

  • To maintain their competitive edge, some Japanese companies started

  • converting their full-time employees  to part-time workers.

  • In 2019, the number of non-regular  workers rose by 2.1%,

  • outpacing the 0.5% growth  among regular employees.

  • Despite record employment   under Abenomics, Japan's poverty rate

  • is the second highest among the Group of Seven nations at 15.7%, and above the OECD average.

  • While large Japanese firms have benefitted under Abenomics,

  • buoyed by a weak yen andbooming stock market,

  • these corporate profits did not trickle down to households.

  • Abe's best efforts to reverse the tepid economic growthincluding

  • pressuring the country's central bank  to adopt unconventional measures

  • in the form of asset purchases  and yield curve control, have produced mixed results.

  • With the Covid-19 pandemic  crippling its economy further,

  • Japan is quickly running  out of options to boost its economy.

  • In the second quarter of 2020,   its GDP shrank by 28.1%.

  • The country's next prime ministerYoshihide Suga, is likely to carry on where Abe left off.

  • Abe may be gone, but Abenomics appears here to stay.

  • Whether it will lift Japan  out of its decades-long doldrums

  • and reverse the poverty trap  remains to be seen.

  • Thank you so much for watching our video!

  • What do you think about Abenomics? Comment below and don't forget to subscribe!

In 1987, Donald Trumpwho was then  a flamboyant millionaire ran full-page ads

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    Summer posted on 2020/10/08
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