Five challenges facing Japan

Tokyo Governor and leader of the Party of Hope Yuriko Koike (C) waves from a campaign car on the last day of campaigning for the general elections in Tokyo on Oct 21, 2017. (Photo: AFP/Toru Yamanaka

Despite a labour shortage, wages have not risen in a meaningful way and tempered domestic consumption, forcing policymakers to dish out a generous stimulus package to safeguard the fragile economy.

The mix of problems has pushed many young people to postpone marrying and starting a family, only adding to the demographic problem.

The government has done its best to encourage young people to have children and urged firms to raise wages and help employees achieve a healthy work-life balance. But the efforts have not resulted in significant changes.

As people migrate from the countryside to the cities, experts predict that Japan's regional communities will gradually fade away and urban centres will be swamped by an elderly population.

ECONOMIC GROWTH, BUT SLOW

Japan has managed six straight quarters of economic growth - its best run in a decade - but at a rate far behind Asian competitors such as China and India.

The latest annual growth rate stood at a sluggish 1.3 per cent, eking out a slight gain from the 0.9 per cent when Abe took power.

Abe has sought to pep up the world's third-biggest economy with a high-profile blitz dubbed "Abenomics", a combination of big government spending and ultra-loose monetary policy from the Bank of Japan.

But while it fattened corporate profits and has sent the stock market to a 21-year high, it has failed in the goal of shrugging off the deflation that has plagued Japan for decades.

BALLOONING DEBT

Japanese government debt is at the highest level of any industrialised nation, more than double the size of its economy.

Experts have long warned Japan must shrink its debt mountain or face a sharp increase in its borrowing costs and even the risk of default.

But Abe has continued to issue new debt to fund stimulus packages to prop up the lumbering economy.

He has also delayed a second consumption tax hike, a step economists say is needed to rein in debt.

Most of the debt is held by domestic, long-term, institutional players, shielding Tokyo somewhat from moves by fickle foreign investors.

CHANGING BUSINESS CULTURE

Japan has struggled to keep pace with globalisation and changing times, especially in its once mighty corporations, which now lag behind their foreign competitors in terms of innovation.

The country's firms have been slow to get women in top positions and have struggled to integrate the older population.

Meanwhile, some traditional male-dominated boardrooms have become scenes of scandals, such as at Toshiba where executives ignored codes of sound governance and hid financial losses.

Two high-profile scandals at carmaker Nissan and steel manufacturer Kobe Steel - which employed a young Abe - have dented the reputation of the formerly unassailable Japan Inc.

Abe has attempted to cut red tape and encourage innovation, but critics say reform is proceeding at a snail's pace.

Boosting immigration to reinforce Japan's workforce and ease the population crisis is the subject of much scholarly debate but the idea has never really gained public support.