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Korean Economy: Lessons from Japan’s Stagnation

January 23, 2025

Today’s Brief

Billy Yang

South Korean and Japanese Economies: Lessons from the Lost Decade and the Era of Low Growth

1. Similarities and Differences Between the South Korean and Japanese Economies

The South Korean economy has entered a phase of low growth, reminiscent of Japan's "Lost Decade."
Japan's "Lost Decade" was a period of prolonged low growth and social shock following the collapse of its economic bubble.
South Korea's growth rate is trending downward, with projected growth rates of 1.8% and 2.1% for 2023 and 2024, respectively.
Unlike Japan, wages in South Korea are still rising, but this cannot mask the structural problems in the economy.

1) Decline in Growth Rate and Aging Population

Japan has failed to address the issues of aging and low birth rates amid prolonged low growth, leading to social stagnation.
In Japan's case, it took a long time to acknowledge the low growth, which led to delays in political and economic responses.

2) Wage Stagnation and Changes in the Business Environment

From the late 1990s, Japan faced corporate bankruptcies and structural changes, leading to long-term wage stagnation.
Since 2012, corporate performance has begun to improve, and efforts to stabilize the labor market and raise wages have also begun.

3) Lack of Industrial Innovation

Japan lagged behind in the growth of IT and new industries in the 1990s, failing to rapidly transform its industrial structure.
Large corporations such as Sony and Hitachi struggled with business innovation until the mid-to-late 2000s.

3. Perspectives and Challenges for the South Korean Economy

1) Acknowledging and Responding to Low Growth

Many argue that South Korea has already entered an era of structural low growth and must acknowledge and adapt to it.
The issues of aging and low birth rates are following a similar path to Japan, posing serious social and economic challenges.

2) Strategies for Surviving in Global Competition

South Korean companies need to take a bolder and more strategic approach to industrial restructuring and exploring new markets.
Intensified global competition, such as the rise of China's semiconductor and battery technologies, poses a significant threat to South Korean companies.

In Japan, low growth has maximized internal social loss and deprivation, affecting high suicide rates and psychological crises.
South Korea also needs to build a national consensus and cooperation system through a realistic understanding of structural problems.

4. Hope for South Korea in the Era of Low Growth

Japan has gradually recovered its economy through long-term corporate restructuring and technological development.
South Korea has significant potential for young people's creativity and innovation to play a strong role, and strengthening new industries and strategic investment using this potential is important.
It is necessary to read the global economic trends and adopt a flexible policy and attitude towards change.

< Summary >
The South Korean economy has already entered an era of low growth and should learn from Japan's "Lost Decade."
The need for aging and industrial structural transformation, and countermeasures against intensified global competition are urgent, and new technologies and market development are essential.
Acknowledging the era of low growth and taking an innovative approach to overcome it is important.

Crafted by Billy Yang

*YouTube Source: [경제 읽어주는 남자(김광석TV)]

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South Korean and Japanese Economies: Lessons from the Lost Decade and the Era of Low Growth 1. Similarities and Differences Between the South Korean and Japanese Economies The South Korean economy has entered a phase of low growth, reminiscent of Japan's "Lost Decade." Japan's "Lost Decade" was a period of prolonged low growth and…