SWOT Analysis of Japan: How Aging Population leads to Economic Debt

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Japan is a small island in the Pacific Ocean. It neighbors China and South Korea, and has a poor relationship with both. The country is known for their intense work ethic (that doesn’t come without problems), highly educated citizens, and a compulsion to be contributing members of society.

I’ve discussed the macro-environmental impact on Japan in a previous PESTLE analysis. Now, this SWOT analysis of Japan explains the strengths, weaknesses, opportunities, and threats affecting the country at this very moment.

Strengths: A insistence to contribute to society from a young age

The Japanese are known for their efficiency in a variety of industries, such as gaming, robotics, and wireless communication. Wifi is accessible in nearly every hub of urban Japan, making smartphones the leading method of communication amongst everyone.

The country is also known for their contributions in manufacturing reputable automobiles like Toyota, Subaru, and Honda, which are purchasable in countries all over the world.

What makes the Japanese such a hard working population? It starts at a young age. As children, they’re granted access to leadership roles. Students are voted as class president and vice president, and everyone works together to clean classrooms, host school festivals, and school trips. It’s also common for children to juggle school with many extracurricular activities such as learning an instrument and additional languages.

Citizens are expected to become contributing members of society, to make goals and achieve them. Those who do often deliver quality products and services to the economy. Those that don’t are labeled NEETs (stands for Not in Education, Employment, or Training) and are ridiculed for being useless in society.

Japan is also known to be a rather safe country, especially in comparison to places like the United States. For instance, Japan’s total crime rate is four times less violent than the U.S. And violent crimes are 148 time more likely in the U.S than Japan. Perhaps the reason why crime rates are so low is because of the heavy emphasis on being a productive member of society.

Weaknesses: A decline in birth rate and hike in aging population leads to economic debt

Japan has far too many people for its little island. Most populations congregate in major cities, like Tokyo, because much of the island is inhabitable. Because of the concentration in cities, rent prices are high and homes are crammed together to make room for new developments.

The island is frequently visited by natural disasters. In the last few years, Japanese citizens have witnessed devastating earthquakes and tsunamis, but they also need to worry about floods, volcano eruptions, and typhoons.

Another worrisome problem is the low birth rates. Many couples aren’t producing children. This directly affects the economy, investments, and business growth. Although low birth rates were identified as a problem years ago, there’s been little change since.

And did you know the oldest person in the world lives in Japan?

At 116 years old, Kane Tanaka is the oldest living person. Although she reigns as the oldest, Kane isn’t alone; Japan is home to the biggest aging population in the world. This, combined with the low birth rate, is problematic for the economy as more people are leaving the working world compared to those entering it. This is one of the reasons why Japan is one of the leading countries in debt.

Opportunities: Tons of disposable income to invest in new businesses

Japan is in a position to provide more products to international countries. It’s already ahead in cosmetics, electronics, and transportation. In fact, Japan is home to the Shinkansen (bullet train) railway system and the Maglev trains, which can clock at 375 miles per hour. Imagine if this type of fast, convenient travel was available everywhere?

Japanese citizens have plenty of disposable income, which they use on luxury products. However, they can also invest in new product, services, and businesses — yet another way to boost the economy and put a dent in the trillions of debt the country is in.

Japan doesn’t even need to offer physical products — citizens can grow e-commerce businesses, allowing the young to adopt an entrepreneurial positions. Not only will this bring in new business to the Japanese economy, it’ll also provide more options to people who wish to avoid the monotony of working for one company their whole lives — common for businessmen in Japan.

Threats: A rising debt and difficulty recovering from recessions

Unfortunately, it’s not easy for international businesses to sell products in Japan. The country has strict trade regulations and rules. It’s difficult for any international company to introduce products to the Japanese, but it also makes it difficult for the Japanese to offer products to a global market.

With the country’s debt so high, the birth rates so low, and a growing elderly population, there’s a massive need for foreign trade. And yet, this isn’t happening.

And what about the tax rates? Japan maintains high taxes on goods and services. It’s difficult for new businesses to make any profit when these taxes are constantly eating away at it.

Combine these problems into one and you’ve a recipe for economic collapse. If another recession were to hit Japan, the country may not bounce back. In fact, compared to other countries, it took Japan quite a while to recover after the last recession. This is likely because the country relies heavily on local business to build the economy, with little investment to outside sources.

SWOT Analysis of Japan: Conclusion

Japanese citizens are known for their strong work ethic, resiliency, and dedication. Much of this is due to the world class education they have. But there’s only so much the Japanese can do when they must rely on local and national businesses to build the economy.

Stiff trade regulations make it difficult for companies to branch out of Japan and find international consumers. Maintaining the largest aging population takes a toll on the country’s resources, and low birth rates mean not many will be entering the workforce in the next few years. In fact, they’re likely to see more people leaving the workforce than going in.

Japan has the opportunity to concentrate efforts into building new businesses and succeed in international economies— although they have to overcome the trade regulations first. They’ve much to offer; from cosmetics to transportation to robotics. Hopefully this happens before the country’s debt grows larger.

Image by mohamed Hassan