There was a time, specifically the late 80s and early 90s, when the land of the rising sun was being touted as the new economic superpower. Since the end of WWII, the country’s industries had become increasingly competitive against the West. Some of its corporations—Sony, Toyota, Honda, Mitsubishi, etc.—had become household names across the globe. In one of the most critical areas of a modern economy, the manufacture and sale of computer memory chips, it had surged ahead of the US, inventor of the industry,.

And then the tide turned. It’s GDP had increased relative to that of the US since 1950 but then, about 1990, it began to decline relative to the US and has continued that trend ever since. Now many observers express concern about Japan’s economic future.

The most important reason for its relative economic decline is demographic. With low fertility and its aversion to immigration, its working-age population has declined rapidly. Its GDP growth has slowed accordingly.

But this is deceptive. While the country’s overall GDP has flatlined, its GDP per working-age adult has continued to increase, i.e. its workers continue to become more productive.

Furthermore, Japan continues to maintain high employment. Its youth unemployment rate is an impressively low four percent. (China’s is 13 percent, Canada’s 10 percent.)

It’s overall economic performance is in fact rather good. Indeed, according to a New York Times article by economist Paul Krugman, “In some ways, Japan, rather than being a cautionary tale, is a kind of role model—an example of how to manage difficult demography while remaining prosperous and socially stable.”

The country is, in fact, the kind of role model we need if we are to achieve a sustainable future We need to reduce our demand on the Earth’s resources and reducing our populations, as Japan is now doing, will contribute to that.

Yet in order to gain public support, we cannot significantly reduce the individual standard of living. By increasing our productivity, as Japan is also doing, we can achieve that as well even if our populations, like Japan’s, are aging. Indeed, with advancing technology, including the magic of artificial intelligence, we should be able to increase productivity as never before.

Japan is, inadvertently, pointing the way to where the future must take us—to sustainability. It bears close watching.

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