For a long time, I have been concerned about the economic prospects for Japan, mainly regarding the large budget deficit, slow GDP growth, deflation, lack of domestic demand, few natural resources, low birth rate, and aging population.
This article in the WSJ provides a nice analysis of the situation in Japan:
Sanchanta, Mariko, 2010. Japanese firms send work overseas. The Wall Street Journal, Oct. 24.
The article focuses on the strong value of the Yen in relation to the Dollar and the emphasis on an export oriented economy rather than domestic demand.
It is surprising that some of the leading Japanese auto manufacturers outsource as much as 70% of production overseas.
In addition, it is amazing that consumer prices in Japan have increased just 8.5% since 1990!
The following quote from the article sums up the situation in Japan:
"'There are worries about the economy—domestic demand will not pick up, especially with the population declining and a greater proportion of retirees eating into their savings. It's a gloomy outlook for household income,' says Credit Suisse's Mr. Shirakawa. 'Domestic investment and consumption will continue to shrink.'"
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