Japan’s is the third largest economy in the world. To an extent, it has suffered an additional handicap as a result of the Global Financial Crisis since its currency, the Yen, has been seen as the world’s first choice safe-haven currency. This has made Japanese exports less competitive in importing markets, but has meant that raw material imports have been cheaper. In the summer of 2010, the Euro bought a little under 170 Yen: two years later, it had dipped below 95 Yen. It currently buys 124.5 Yen, having staged somewhat of a recovery after it looked likely that Emmanuel Macron would win the French presidency (as he did). The recent fall of the Yen against the Dollar has stuttered as doubts mount over President Trump’s ability to get his economic policies through as he becomes ever more deeply mired in the Russian electoral interference debacle.
The above notwithstanding, the Japanese economy grew by 0.5% in Q1, giving an annualised growth rate of 2.2% which is the best growth seen for a year. To highlight the above (in part, at least), the current period of growth now represent the best sustained growth that Japan has experienced in over a decade.
Growth has been supported by infrastructure spending ahead of the Tokyo Olympics which will take place in the summer of 2020 and better export data, partially driven by the falls in the Yen which restore some competitivity to Japanese goods and boost earnings in foreign currencies when repatriated to Japan and converted to Yen.
Japan faces problems associated with an aging population which will expand the cost of welfare, health and social care budgets. It has the largest national debt mountain of any developed country and is still trying to stoke domestic demand and banish deflation once and for all.