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2017 Vol.1
The World and Japan in 2017: Gaining a Clear View by Expecting the Unexpected

2017/02/15

People say that several unexpected events occurred in 2016, including Britain’s decision to leave the European Union and the election of Donald Trump as President of the United States of America. Given that such events kept happening, however, we may wonder whether we should have expected them. Although it is no longer seen as a recent event, the collapse of Lehman Brothers changed global economic trends in various ways. Correctly understanding these changes will allow us to better expect the unexpected.
The collapse of Lehman Brothers triggered changes in global trends, and the growth of the global economy has slowed since then. The slowing global economy works against the Japanese economy, which has relied on export expansion as the engine of economic growth. Japan also faces the problem that its economic competitiveness has declined relative to other countries, even while emerging countries have achieved further economic development.
However, taking into account the changes in external circumstances and looking toward 2017, we can anticipate that the Japanese economy will experience a mild recovery as the global economy grows slowly but steadily. Despite this, it seems difficult to break out of the long-lasting stagnation that started with the collapse of Lehman Brothers. Because Japan has an aging populace and shrinking population, steady stagnation inevitably continues in certain parts of the economy.
What can be done to improve Japan’s ability to grow its economy? First, it is important to abandon downsizing strategies and to become aggressive in improving competitiveness. In addition, the country must resolutely respond to the spread of trade protectionism, which may give rise to formerly improbable events. The government must also restore normalcy in its fiscal and monetary policies, taking into account Japan’s aging society. This last point is likely to be the most difficult issue.

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