Between 1991 and 2021, Japan’s average annual inflation rate was a mere 0.35%, but since April 2022, inflation has exceeded 2% every month. In March, the Bank of Japan made the historic decision to raise interest rates for the first time in 17 years, signaling the end of the world’s last experiment with negative interest rates. This recent economic surge is causing excitement for Japan as it seems that its lost decades may finally be coming to an end.
The Nikkei stock index recently surpassed its bubble-era high in February, while the broader Topix index reached its highest level since 1990 last week. With higher inflation and more dynamic companies, Japan is expected to enter a new phase of growth, which will help the country manage its public debt and maintain its status as one of the world’s leading economies. The question now is, what comes next for Japan?
Optimists believe that Japan is poised for a resurgence. They argue that Japan is truly back this time, with a revitalized economy. Taiwanese semiconductor giant TSMC is just one example of a high-tech company looking to strengthen their supply chains in Japan by investing billions of dollars in new manufacturing facilities.
Despite these positive signs, there are also concerns about how long this economic momentum will continue and whether it will sustain itself over the long term. Only time will tell if Japan can maintain its position as a global powerhouse or if it will face further challenges in the future.
