Japan as China’s Mirror: Lessons From 30 Years of Economic Struggle

Japan as China’s Mirror: Lessons From 30 Years of Economic Struggle

Here’s the thing about Japan. It has always been a mirror. A mirror that shows both what to learn and what to avoid. Today, China is entering a new economic cycle. And yes, challenges are piling up. Real estate pressure, debt risks, and an aging population. So, how do we handle all of this? One useful approach is simple. Learn from Japan’s experience. Because everything China is facing now, Japan faced 30 years ago and Japan paid a huge price for its mistakes. Let’s start with real estate. When Japan’s housing bubble burst in 1991, the government made a shocking move. Instead of stabilizing the market, they raised property taxes, increasing holding costs right in the middle of a crisis. The result? Home prices fell another 30% and within 5 years Japan saw more than a 50% total decline. That was the beginning of the so-called lost decades. Then came the second mistake, doing nothing. Influenced by classical economic thinking, Japan chose not to intervene. They believed the market needed to fully clean out the excess on its own. But that hands-off approach triggered panic. Assets collapsed. balance sheets deteriorated and both companies and households rushed to pay down debt instead of borrowing. This led to the famous balance sheet recession. Even with interest rates at zero, no one wanted loans. The whole economy tightened at the same time and Japan fell into long-term deflation. It wasn’t until Prime Minister Abe took office that Japan finally entered a new phase. He realized inaction was a mistake and launched abonomics, the three arrows, massive monetary easing, fiscal stimulus, and structural reforms. Over more than a decade, these policies gradually pulled Japan out of deflation. Prices started rising, growth picked up, capital returned, and housing prices in key cities even surpassed their 1991 bubble peaks. Now, let’s look at aging. Japan has the oldest society among major economies. More than 30% of the population is over 65. But because the government responded early, Japan built a huge silver economy worth over tens of billions of dollars. From elderly care to smart home products to senior friendly housing. It turned a challenge into a competitive industry. So here’s the point. Japan’s past is China’s mirror. What Japan did wrong, China can avoid. What Japan did right, China can adapt. Learning from Japan is not about copying. It’s about understanding the risks ahead and choosing better paths forward.

Japan’s economic journey—from the burst of its real estate bubble, to decades of stagnation, to the revival under Abenomics—offers invaluable lessons for China today. In this video, we explore what Japan did wrong, what it eventually got right, and why its experience has become a mirror for China as it faces real estate pressure, rising debt, and an aging population. A 2-minute deep dive into history, policy, and the future.