The Japan rebound is now in full force

Still, the sea changes in the Japanese economy must be a wake-up call for its neighbor.

Kim Dong-ho

The author is an editorial writer of the JoongAng Ilbo. The tide has made a decisive turn for the Japanese economy for the first time in more than three decades. After hit by the explosive asset bubble burst in 1990, the Japanese have stayed shy towards the stock market. There are many among the elderly who prefer to keep their cash hoarded at home. There had been a bizarre case of billions of yen notes gathering mold after being stored in boxes instead of banks which offered zero returns for deposits for decades.

The Japanese have been stock-phobic after Japanese stocks sank to one-fourth of its value after the bubble burst. But they are flocking back to the market after the Nikkei index hit above 30,000. Money waiting to buy stocks swelled to 15 trillion yen ($10.7 billion), the largest since 1997.

Taiwan’s TSMC, the foundry juggernaut, is building its massive plant in Kumamoto, Japan with generous incentives from the Japanese government. [LEE YOUNG-HEE]

Japan is seeing a meaningful change in wages, one of the perennial problems for the world’s third-largest economy during its lost-decades period. Wages have stayed stagnant as the country’s interest rate stuck in the zero territory for 30 years. A recruit from the elite University of Tokyo got a starting pay of 220,000 yen ($1,580), below the minimum wage in Korea on a monthly basis. That wage is finally going up in Japan. Fast Retailing, the owner of Uniqlo, has raised its starting monthly salaries for college graduates to 300,000 yen from 255,000 yen this year. The chip complex in Kumamoto Prefecture, where Taiwan Semiconductor Manufacturing Corp. (TSMC) is building its second plant, is paying factory workers 280,000 yen monthly, 40 percent more than the average wage paid in the region. As wages rose, workers are shifting jobs to chase higher pay. Nippon Life Insurance has lifted its average monthly salary for 50,000 employees by 7 percent to keep them on the payroll.

The upward wage trend is what the Bank of Japan watches most closely. Japan has started to shake out of the entrenched deflation with the annual gain in the base rate topping 3 percent. However, to ensure that the inflation dynamics put the economy back on track, wage inflation must keep up. The Nikkei newspaper reported about the upturn in wages for even small and mid-sized companies in provincial areas for the first time in three decades. Wages increased 3.58 percent on average for large companies and 3.23 percent for smaller companies this year. The cases of listed companies handing out stocks to their employees as rewards have surged by 10 times over the last five years.

Japan Inc. has finally realized that they cannot sustain its payroll if compensations stay the same amid low birthrate and fast aging. Female employment also accelerates fast thanks to a government policy to bolster wages and build a favorable environment for women to co-manage work and childcare. Tokyo also reinforces an immigration drive to draw foreign talents toward the goal of filling 10 percent of the population with non-Japanese by 2070.

The global inflationary run has arrived as an electrifying impetus to the lethargic economy. Not only wages, but home prices in large cities also have jumped. Land prices shot up by the highest in 15 years. Japan has put aside its long-held pride in technology supremacy and partnered with American and Taiwanese enterprises to build chip plants in the country.

Japan’s complete exit from deflation will have big impact on neighboring Korea which has similar manufacturing and export portfolio. Japan has lifted its curbs on exports of chip materials and equipment to Korea in four years due to the need for a stronger trilateral alliance with Korea and the U.S. amid the hegemonic battle between America and China. But Japan is meticulously strengthening its economic security. Japan’s empowered economic security could be threatening for Korean chipmakers if they lose their competitiveness in the semiconductor sector as a result of the U.S. backing of Japan’s chip power.

While Japan is veering towards the exit from its lost 30 years, Korea has entered a slump that could be as lengthy and devastating as Japan’s. A former CEO of Samsung Electronics pointed out that Korea’s political circles had wasted the past decade vainly battling among themselves, expressing concerns that the next 10 years could be no different.

While Tokyo and Osaka are undergoing major urban renovation, Seoul is paling, as it merely adds paint to worn-out walls. Japan is not without problems, as seen in its decision to discharge the wastewater from the crippled Fukushima nuclear plant and its sitting on an enormous government debt. Another weakness of Japan involves a lack of world-class Big Tech. Still, the sea changes in the Japanese economy must be a wake-up call for its neighbor.