A New Era for Japan

Emperor Akihito

May 20, 2019

On the last day of April, Emperor Akihito of Japan abdicated his position after a 30-year reign.  He has been succeeded by his son, the 59-year-old Emperor Naruhito.  In abdicating, Akihito is the first Japanese emperor to voluntarily leave the throne since Emperor Kokaku in 1817.  During Akihito’s time in power, the 85-year-old emperor oversaw many dramatic changes in his country: an ageing of the population, the diversification of the economy, and generally sluggish growth.

Akihito began his reign in 1989 after the death of his father, Emperor Hirohito who had held power since 1926. Remarkably Hirohito led his country during World War II, surrendered to the Allied Forces, and was then allowed to continue as Emperor through the reconstruction and redevelopment that followed.

Akihito became Emperor near the end of the “Japanese Miracle,” which saw the country rise to become a global economic and industrial powerhouse.  At the outset of his reign it seemed that his job was simply to finish what his father had started and bring Japan into the 21st century. Unfortunately, for much of last 30 years the Japanese economy struggled with low growth, little to no inflation, and a demographic shift that did little to help the country.  It is never a good sign when the first ten years of your reign are known as the “Lost Decade,” and after a further ten years people spoke of the “Lost 20 Years.”

Given the limited power of the Emperor since World War II, these issues were not really the fault of Akihito. They were more macroeconomic in nature.  Emperor Hirohito’s era also bequeathed a major policy problem: The Plaza Accord introduced in 1985.  This policy doubled Japan’s exchange rate against the US Dollar and is credited with sparking an asset price bubble that collapsed from 1989 to 1992.  Compounding the economic problems further, Japanese demographic shifts led to an aging work force, and strict immigration laws prevented new additions to the workforce.  Though productivity increased significantly it was not enough to counteract the larger negative forces at play.  To his credit, Akihito gave his best efforts to support Shinzo Abe, the current prime minister, in his attempts to restart growth. These efforts do now seem to be paying dividends, with most recent data showing that 2019 first quarter growth in Japan was at an annualized rate of 2.1%.

As Emperor Naruhito begins his story the world will watch on.  There are many macroeconomic issues still facing Japan, but with deflationary pressures easing and a tight labor market, things are looking better than they have in many years.  There is one change that will increase activity for calendar makers. Official Japanese calendars are reset at the start of each emperor’s reign.  2018 was Heisei 30, being the 30th year of the Heisei era.  On May 1st, the start of the new Reiwa Era, calendars reset to Reiwa 1 and so official calendars will need to be rewritten and reprinted to reflect the new era.

Carey Blakley

Numbers 0520