[The Editors' Verdict] The Shadow Beyond Japan's "Lost 30 Years"

The Tokyo Stock Exchange in Japan has recently surpassed the historic high of 39,000 points for the first time in 34 years, attracting global investors' attention. Starting from when Warren Buffett significantly increased his stakes in Japan's five major general trading companies last year, Korean retail investors, known as Donghak Ants, have been flocking to the Japanese stock market more than the U.S. stock market.

[Image source=AFP Yonhap News]

Overseas, there is widespread praise that Japan has finally escaped the massive quagmire known as the "Lost 30 Years," but the atmosphere inside Japan is completely different. Despite the return of economic prosperity, the cabinet approval rating, which should naturally reach new highs, is hitting rock bottom. According to a telephone survey conducted by Mainichi Shimbun on the 17th and 18th among 1,024 adults aged 18 and over in Japan, the approval rating of Prime Minister Fumio Kishida's cabinet dropped by more than 7 percentage points from the previous month to 14%. This is practically an unmanageable figure for cabinet operation.

The reason the cabinet approval rating is hitting rock bottom is that the lives of ordinary people have been pushed to the extreme. The Ministry of Health, Labour and Welfare of Japan announced on the 6th that the real wages of Japanese workers decreased by 2.5% compared to the previous year. This is the steepest decline in 33 years. Conversely, during the same period, the consumer price index rose by 3.8%, marking the highest increase in 42 years.

Regarding the widening gap between the stock market and the perceived economy, many point out that it is an illusion created by the weak yen. The rapid rise in Japanese stocks is merely a fantasy caused by the unlimited quantitative easing policy that has continued for over 10 years since the announcement of Abenomics in 2012, combined with geopolitical variables.

The unlimited quantitative easing released funds into the market, which flowed into exchange-traded funds (ETFs) investing in the Tokyo Stock Exchange. Effectively, the government guaranteed the index rise, attracting safety-oriented international investors like Buffett in large numbers. Additionally, the U.S.-China hegemony struggle triggered a massive shift in semiconductor supply chains, and Japan emerged as a beneficiary of this supply chain relocation. As a result, unlike the perceived economy, the Japanese stock market succeeded in breaking through the high points of the Lost 30 Years.

However, the bubble created by monetary policy and geopolitics carries the risk of bursting easily. Moreover, unlike the bubble economy of the 1980s and 1990s, the Japanese economy faces the enormous challenges of low birth rates and an aging population. According to a forecast by Nihon Keizai Shimbun (Nikkei), Japan’s labor shortage problem is so severe that by 2040, only 16 years from now, the workforce will be short by more than 25% across all industries.

If the funds released so far cause excessive bubbles again in stock and real estate prices and trigger inflation while income and consumption decline, Japan might face another Lost 30 Years. The geopolitical tensions surrounding the Taiwan Strait could also escalate into a wartime situation, turning into a blade threatening the economic lifeline.

The shadow cast behind this Japanese stock boom offers significant implications for South Korea, which follows Japan every 15 years. Unlike Japan, where policy funds flow into companies through the stock market, South Korea is entirely absorbed in boosting real estate prices, making it difficult even to expect the illusionary effects of a stock market boom. A much harsher economic ice age is approaching, but the Korean political sphere still shows a very relaxed attitude.

This content was produced with the assistance of AI translation services.