Scenarios for the Development of the Japanese Economy after COVID–19

Abstract

The article presents scenarios for the development of the Japanese economy after the COVID–19 pandemic. The author showed that the Japanese economy is slowly recovering due to a strong political support. During the pandemic, Japan implemented several large economic support packages of government spending, accompanied by aggressive monetary policy measures under the “Abenomics”. The study indicates that the highest number of additional measures to support the Japanese economy during the pandemic compared to other countries of the world. Analyzing the forecast estimates of the Japanese and international research organizations, the author has formulated two scenarios for the medium-term development of the Japanese economy. The first scenario assumes a strong recovery of the Japanese economy with the successful implementation of the following reforms: reducing the risks of the increasing public debt; improving the sustainability of the monetary policy; strengthening the banking sector to reduce systemic risks; increasing labor supply, productivity, and investment; transition to a green and digital economy; forced closure of “zombie-firms”. According to the second scenario, the Japanese economy will face stagnation due to the following reasons: low efficiency of the economic support measures; deepening of the demographic problems and problems of the public debt reduction; unfavorable external factors. The study has shown that the demographic problems are the biggest risk for Japan's economic recovery. Moreover, weakening of the sub-global economy poses
a serious risk for Japanese exports. The Japanese economy could also be negatively impacted by high import commodity prices and disruptions in export markets as a result of the sanctions against Russia. The article describes possible prospects for Japanese-Russian economic relations. The author assumes that it is not beneficial for Japan to create barriers in trade relations with Russia, and in order to stabilize the domestic market, Japanese companies seek to save their shares in joint oil and gas projects in Russia.