Brand Finance ® Brand Stories Japan: Land of the Set t ing Sun?

Nat ion Brands 100

Japan: land of the setting sun?In the late 1980s Japan was a rapidly expanding economy that cast a long shadow across the Pacific. Japan’s booming stock market and rising exports were hitting new highs as investors from Tokyo travelled the world buying up foreign assets, including the Rockefeller Centre in New York. The future, it seemed, was going to speak Japanese. By 2011, however, the situation in Japan had changed dramatically. Japan has experienced two “lost decades”, as it failed to come to terms with its economic malaise, chronic indebtedness, and lack of political leadership. The March 2011 tsunami and accompanying nuclear leak turned this slow decline into a dramatic crisis.

Even before the financial crisis Japan was struggling with slow growth, high levels of indebtedness, and a shrinking work-force. The fastest aging population in the world is shrinking Japan’s labour force even as it balloons the country’s budget social services budget. The March 11th earthquake and tsunami - which killed 15,000 people - has exacerbated Japan’s economic problems while exposing the

country’s weak leadership and inability to respond growing challenges.The tsunami and accompanying nuclear disaster caused all ports in the country to be closed, massively disrupting economic supply-chains. The reconstruction cost is estimated to be $288 billion, an amount that represents over 60% of Japan’s $461B annual tax revenues. Moody’s rating service downgraded Japan’s debt in August based on the fact that the country had no plan to deal with its debt (which is currently worth 233% of GDP).

This disaster has had a massive impact on Japan’s nation brand, which lost $679 billion in value. The country lost on all three measures of brand strength, especially infrastructure and efficiency. Supply chain shut-downs, a power, crisis and transport disruptions mean that Japan fell from AA+ to A-, and is now tied with India on this measure of the ease of doing business. Japan’s brand equity also fell from AA- to A as perceptions of Japan as a safe and stable country fell massively. On September 2nd Yoshihiko Noda became Japan’s 6th prime minister in 5 years when his predecessor stepped down, and this only further underlined the weakness and instablity of Japan’s political system.

45 © Brand Finance plc 2011

Japan: land of the setting sun?

The high-profile failure of the Fukushima nuclear reactor harmed the reputation of the Japanese engineering and technology which is at the heart of the Japanese economic model.

For all of the pessimism surrounding Japan, there are reasons for hope. Japan’s anaemic GDP growth obscures the fact that the country’s GDP per capita has been as high as America’s. Japan still receives more US patents than any other foreign country, and despite political problems it is constantly expanding its trade with China. The Japanese are widely seen as a resilient people, and optimists have pointed out that Japan’s industrial production recovered quickly from the 1995 Kobe earthquake. Resilience and determination, however, will not be enough to overcome the serious political, economic, and demographic challenges that face Japan. Many economists predict that Japan faces a slow decline, but if 1980s predictions of Japan’s economic dominance were misplaced, perhaps reports the country’s demise have also been greatly exaggerated.

46© Brand Finance plc 2011© Brand Finance plc 2011

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