Japan's Economic Prospects

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JAPAN attracted world attention in June 1960 when largescale demonstrations were conducted in opposition to ratification of the security pact with the United States and to the visit of President Eisenhower. Until then, most people had thought of Japan as a stable and prosperous nation making great economic progress under a conservative and pro-Western government. They were undoubtedly shocked by the unexpected incidents and they must have asked themselves: Where is Japan heading?

The question cannot easily be answered even by those living in Japan and with close knowledge of current events. The answer must be found not in short-term but in long-term considerations, and among these will be the probable future economic trends and conditions in Japan, which in turn will influence the social and political climate.

A study recently completed in Japan predicts a rather fundamental change in the nation's economic structure in the next 10 to 20 years from a labor-surplus economy containing many underdeveloped elements to a labor-shortage economy that can be described as highly developed.^[i] Per capita national income is expected to rise from the present level of $300 (estimated for 1960) to a level of about $800 by 1980. This would be roughly equivalent to the current level of per capita national income in Western European countries.

In support of the above prediction there are, first of all, demographic factors. There was a rapid increase in population beginning with the modernization of Japan's economy in the early Meiji period. As the death rate declined and the birth rate continued at a high level, Japan's population increased rapidly from about 35,000,000 in the 1870s to about 85,000,000 by the early 1950s. After 1950, there was a sharp decline in the birth rate and in spite of a concurrent decline in the death rate, the net increase in population became smaller than in the earlier years. Japan now has reached a stage of demographic development similar to that found among highly industrialized countries. Her rate of net increase in population (the difference between birth rate and death rate) is now roughly half that of many Asian countries.^[ii] The prospect is that Japan will finally be freed from its past problem of chronic population pressure...