A major geoeconomic event occurred in 2018 when South Korea’s real GDP per capita surpassed that of Japan. By 2026, the International Monetary Fund projects that South Korea will be 12 per cent ahead of Japan.
What makes this event all the more important and illuminating is that South Korea shares so many of Japan’s structural flaws. South Korea’s ability to ameliorate those flaws provide lessons for Japan.
The measure used to calculate ‘real’ GDP is called Purchasing Power Parity, which eliminates distortions caused by varying price levels and gyrations in exchange rates.
How South Korea overtook Japan
South Korea overtook Japan because its growth in productivity has outpaced Japan. Until the early 1990s, Japan was rapidly catching up to the United States. Its productivity peaked at 71 per cent of the United States’ level in 1997. Since then, it has fallen back to just 63…
