Premature obituariesThe South Korean team has been regarded as the second strongest sports force in Asia. Korea was ahead of Japan in the Olympic medal count since 2004. But that changed at the 2016 Rio Olympics. Japan won 12 gold medals compared to South Korea’s nine. In total medal counts, Japan was way ahead with 41 against Korea’s 21. The Japanese team won silver in the men’s 400-meter relay behind the mighty Jamaicans with an Asian record time of 37.60. Apart from track, Japanese athletes achieved medals in non-traditional fields like canoe/kayak, tennis, and synchronized swimming.
For a while now, Korea has considered itself a formidable challenger to Japan. Our confidence skyrocketed after Samsung Electronics outpaced Japan’s Sony Corp. in sales. But we have been fooling ourselves. Japan’s gross domestic product of $4.4 trillion is more than triple Korea’s $1.3 trillion. There are a whole list of other companies that are ahead of their Korean counterparts, like Toyota, Toray Industries and Nippon Steel & Sumitomo Metal. As in sports, there are top players in a range of fields in parts, materials, and facilities like Shimano, Hirose Electric and Fanuc.
Some people are pronouncing Abenomics — the aggressive economic stimuli agenda of Prime Minister Shinzo Abe — a failure. The Japanese currency, which slipped to 125 yen against the U.S. dollar through colossal quantitative easing, returned back to four-year highs amid global financial uncertainties and the British vote to leave the European Union. The dollar plunged to the 90 yen range amid expectations that the U.S. Federal Reserve will further push back its timetable to lift interest rates. The yen’s strengthening will dent the profitability of our exporters and further slow our economic growth. The key goals of Abenomics — ending a deflationary cycle and pushing inflation to 2 percent — look unlikely to be achieved. The Japanese economy could return to stagnation.
However, there are some positive signs. Japan’s unemployment rate hit a 21-year low of 3.1 percent in June. That figure is partly due to a thinning working population as the Japanese continue to age. But job opportunities have become so abundant that even Korean college graduates are looking to Japan to find work. Traditional industrial areas involved in shipbuilding, steelmaking and chemicals have gained vitality after getting leaner from years of deleveraging and streamlining. Growth is still at a snail’s pace, but within a normal range for developed countries. Per capita GDP has also steadily increased.
Yet the Abe government is unsatisfied. It announced a 28 trillion yen ($273 billion) stimulus package earlier this month. The Bank of Japan is reportedly mulling another round of quantitative easing for next month. The government and central bank are resolved to continue stimulus campaigns until the economy is safely out of a deflationary cycle and on a solid recovery path. Japan is eager to catch up with China after it lost the title of second largest economy in the world.
It was in 2010 that Japan lost that title — which it had maintained for 22 years — to China. The gap has been widening. That is why the country is staking an astronomical amount of money — and risking enlarging an already massive fiscal deficit — to stimulate the economy.
That’s why the central bank is purchasing back government bonds in what is nicknamed “helicopter money.” We must not conclude that Abenomics has failed from selected data points. Chung June-myong, an adviser to law firm Kim & Chang, who long served as head of Samsung Electronics Japan, says it is too early to determine the results of Abenomics. But Abe’s ambitious policy certainly has brought life back to a lethargic and complacent economy.
The Korean economy, on the other hand, has lost vitality. Yet our authorities don’t appear to have the will or passion to aid the economy through radical steps in the mold of Abenomics. Industrial restructuring has stalled despite a lot of hype. No attempt has been made to reshape the industry.
China may have to thank Korea for having made staggering strides in its economy and technology. It was inspired by such tiny country making globally-recognized products. We too strived hard to catch up with Japan. But Japan remains far ahead and powerful. We have work to do.
JoongAng Ilbo, Aug. 22, Page B8