🇯🇵 Japan

Japan is the world's fourth-largest economy ($4.2 trillion GDP) with 125 million people, and it's the country that best illustrates both the power and limits of economic development. Japan pioneered the Asian manufacturing miracle, gave the world Toyota, Sony, Nintendo, and the bullet train, and has the third-largest stock market globally. But the country has been fighting deflation and stagnation for three decades since the 1990s asset bubble burst. Japan's population is shrinking and aging faster than any major economy — the median age is 49, over 29% of the population is over 65, and the country sells more adult diapers than baby diapers. Despite this, Japan remains the world's largest creditor nation, with net foreign assets exceeding $3.5 trillion. Tokyo's metropolitan area (37 million people) is the largest urban agglomeration on earth.

Automotive (Toyota is the world's largest automaker), electronics, machinery, and chemicals drive exports worth about $750 billion annually. China, the US, and South Korea are the top trade partners. The yen has weakened dramatically — from about 110 to the dollar in 2021 to over 150, boosting exporters but crushing purchasing power. The Bank of Japan held interest rates at zero or negative for over two decades before finally raising them in 2024. Government debt is about 260% of GDP, the highest of any developed country, though most is held domestically. Japan's semiconductor industry, once dominant, is making a comeback with TSMC building a plant in Kumamoto.

Japan has over 68,000 centenarians — more than any other country — and Okinawa is one of the world's five Blue Zones. The country has about 5.5 million vending machines, roughly one for every 23 people, selling everything from hot ramen to fresh eggs. Japan's railway system is so punctual that the average delay on the Shinkansen is 54 seconds per year. There are more Michelin-starred restaurants in Tokyo than in Paris.

Japan's demographic decline is the defining challenge, but the country keeps defying predictions of collapse. The weak yen, semiconductor revival, and defense spending increase signal a more assertive Japan. Don't mistake quiet for decline.