South Korea and Japan
are both the powerful countries in Asia. They have very similar economies.
South Korea has Resembled almost the same courses as Japan in almost every senses economic growth, social welfare, postwar baby boom, birth
control, national pension system, national insurance system, social welfare law.
the past four decades South Korea has demonstrated incredible growth and global
integration to become a high-tech industrialized economy. In 2004, South Korea
joined the trillion dollar club of world economies, and is currently the
world’s 11th largest economy.1
The government has adopted numerous economic reforms from a system of close
government and business ties, including directed credit and import restrictions
to promote the import of raw materials and technology at the expense of
consumer goods, and encouraged savings and investment over consumption
including greater openness to foreign investment and imports. South Korean
companies have accelerated their global business expansion through exporting
and overseas production. In particular, they have stepped up their efforts in
emerging markets, which offer the potential for demand growth.
South Korea has closed the economic gap with Japan as its per capita gross.
This is the first time that the gap in per capita GDP between the two countries
comes below 20 percent since the International Monetary Fund started collecting
related data in 1981.2
Back then, Japan’s per capita GDP was five times that of Korea.
said it’s owed to the current phenomenon that the yen is weakening. Since
Japanese Prime Minister Shinzo Abe took office in 2012, the value of yen to US
dollar has fallen from 79.79 yen to 121.02 yen. The yen’s rapid depreciation
caused a fall in GDP per capita for the past three years. In addition to
the currency factor, the South Korean companies itself have also been help
boosted by factors that include quality and design improvements, the
development of products that match needs in overseas markets, and the
systematic development of global human resources.
Japan has a population of 127 million and South Korea has 51 million which
means that Japan is about 2.5 times bigger. If South Korea wants to catch up
Japan in GDP, it needs to have a better GDP per capita which is hard since both
nations have similar GDP per capita.
Japan and South Korea
compete head-to-head in a number of prominent sectors like automobiles,
electronics, semiconductor, shipbuilding, heavy industries etc. In 2014, The Federation of Korean Industries
(FKI) emphasized that semiconductor production in Korea exceeded Japan to
become the world’s second largest global market share in the telecommunication
device and textile industries of Korean companies superseded the Japanese.
Especially, the operating profit ratio of Samsung Electronics is four times
greater than Panasonic, the number one company in Japan. Hyundai Motors also
has a higher operating profit ratio than Toyota. In the steel and automobile
component industries South Korea has similar market competitiveness to Japan as
well. The truth is that the Japanese are no longer competitive in
these categories and are not particularly concerned that their place has been
taken by nations like Bangladesh and Vietnam. They have moved on from commodity
semiconductors and television-sets. Similarly they have been winding down in
steel, shipbuilding, car assembly, television sets, and of course commodity
semiconductors. In each case the trend has already been apparent for a generation
The pattern of
continually moving from low-end industries to more sophisticated ones has
characterized the Japanese economy from the beginning and these days the
Japanese are quietly feasting on such rich pickings as aerospace and telecommunications.
They were only minor players in this market that since the 1980s is
American-led industries but now Japanese are dominant in everything from
optical fibers to smartphone components, not to mention virtually every serious
manufacturing challenge in the aerospace industry. They supply the superlight
carbon fiber wings for the Boeing 787 for instance.
the extent of Japan’s lead is obvious from the fact that Korea imports so much
from Japan than Japan does from Korea. The Japanese have moved to global leadership
in producers’ goods precisely the category that was the central pillar of U.S.
economic outperformance in America’s best days in the 1950s through the early
1970s. Without imports of such goods from Japan, the Koreans would not have
much to export.
Both Korea and Japan are in a
domestic consumption trough. Lackluster spending is especially conspicuous in
Japan. Since 1995, the growth rate of Japan’s private consumption has stood at
1 percent on the average. Korea’s private consumption increase rate was 3.8
percent on the average in 1995-2012, but has plunged to an average of 2 percent
since the 2008 global financial crisis.
sluggish in both countries. Japan’s investment growth rate has been weak,
averaging -0.2 percent between 2001 and 2012. Korea’s investment growth rate
hovered above Japan’s with 1.9 percent on average in the same period, but the
average increase rate in the past five years remain
Korea and Japan both have a low birth rate coupled with
rapid accelerating population aging, but the low birth rate is a more
serious problem in Korea than in Japan. The population of South Korea
is rapidly aging and the birth rate is one of the lowest in the world following the lead of Japan by a difference of two decades. According to the
National Statistics Office it took Japan 24 years to go from an “aging society”
which is defined as seniors making up 7% of the population3,
to an aged one. The number of population that is over 65 years old stood at
34.6 million in Japan, or more than 27% of its population. But South Korea reached
much quicker to make the same transition than other developed countries. It became
an aging society just 17 years ago and the government expects Korea’s
population to peak in 2031.
In Japan’s case, the productive population forming the backbone of
economic activity hit a peak of 63% of the general population in 1990 before
declining to 56% in 2015. South Korea’s productive population is also expected
to peak at 66.5% in 2017 before declining to reach 56% within 17 years. South
Korea’s labor productivity was also found to be high even by global standards, raising
an average of 4.6% per year between 2001 but with services achieving just half
of that. It’s a similar situation to the one in Japan, where manufacturing
labor productivity has nearly tripled since the 1970s while service industry
labor productivity has risen by just 25%. Another similarity is the dual labor
market structure that has arisen as barriers between regular and irregular work