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What’s Wrong With Japan’s Economy?

Japan’s economy has been in trouble for decades. Massive monetary and fiscal stimulus have so far failed to spur faster growth. This week, the Bank of Japan meets to decide whether to apply yet more economic shock therapy. Here’s the situation the country’s leaders face:

Japan has the world’s oldest population, as well as a low birth rate and little immigration, but its growth problems go far deeper. In the early 1990s, the country’s postwar growth boom collapsed—decades of deflation followed and Japan started to suffer a shortage of workers.

With the Japanese people unwilling to spend, companies are increasingly investing overseas rather than at home. A lack of deregulation further fuels the trend. Wages are stagnant and growth has stayed low, with frequent...


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