The fall of Japan

Once the powerhouses of the global economy, Japanese industrial companies have been hit by a wave of technological innovation from overseas - here's a fascinating snapshot of the decline.

The Japanese economy is never too far from Western minds, especially in the US and Europe.

Will the current economic woes in the US and Europe play out with a Japanese-style grinding bear market? It's hard to know.

Japan is certainly sick of it. The Bank of Japan has started an unprecedented program of quantitative easing in an attempt to revive the economy. Perhaps it’s starting to work. The Nikkei 225 has risen nearly 60% over the past year, although it’s suffered large falls in the past few days.

There's so much data on the world economy it's hard to know where to start. This table (see image below) of the top 20 companies in the world in 1995, from Inside Japan's Powerhouses, is as illuminating as it is simple (Thanks Greg Hoffman). In 1995 10 of the top 20 companies, by market capitalisation, were Japanese, including the top 5. None were Chinese.

Japan list2

In 2013 the list is very different (see Table below). Toyota is the only Japanese company in the top 50. In fact, the top five Japanese companies from the 1995 list are now worth less than Commonwealth Bank, and half that of the 20th company on the 2013 list.

japan table 3

Other changes are notable. Technology now dominates. As does financial services. Gone are tobacco and car manufacturers. It’s a fascinating snapshot of how power has shifted from Japan and the US to China, and how the economic mix has moved from traditional heavy industries to those based on information and human capital. One wonders what the next twenty years will bring.

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