December 16, 2022 12:37
Korea is expected to beat Japan in terms of per-capita GDP next year, according to the Japan Center for Economic Research on Thursday. Japan's per-capita GDP is expected at US$33,334 compared to Korea's $34,505.
The center expects Korea to surpass Taiwan in terms of per-capita GDP in 2024 to reach $40,000 in 2025, $50,000 in 2029 and $60,000 in 2035.
At that point, Korea will rank among the top in Asia, while Japan, which used to be the wealthiest Asian country just two decades ago, is expected to be beaten by the four Asian dragons: Korea, Taiwan, Singapore and Hong Kong.
Singapore already beat Japan in 2007 and Hong Kong in 2014.
Last year, JCER forecast Korea would only beat Japan in 2027 and Taiwan in 2028. But the sharp fall of the Japanese yen this year fast-forwarded that date by about four years.
Atsushi Tomiyama at JCER told the Chosun Ilbo, "Continued investments in R&D, intellectual property rights and facilities made by Korean businesses like Samsung Electronics over the last 20 years resulted in higher per-capita GDP."
In other words, the turnaround is not a temporary phenomenon triggered by exchange rate fluctuations. A key index of this trend is capital intensity, or the ratio of capital and labor that goes into production.
If the figure is set at 100 in 2000, Korea's capital intensity surged to 176.3 in 2021, while Japan's stagnated at 106.6.
When it comes to investment in intellectual property, Korea's level stood at 316.3 in 2021 compared to Japan's 118.1. Thanks to such investments, Korea's labor productivity rate rose 5.9 percent on average each year from 2000 to 2021 but Japan's edged up only 0.6 percent.
Korean businesses invested boldly in next-generation industries such as semiconductors, batteries, electric cars and media content and boosted labor productivity and the economy.
"Japan's negligence compared to Korea and Taiwan in making necessary investments became apparent in the difference in labor productivity," JCER said.
But just like Japan, Korea is weighed down by a declining population and aging society. Japan is home to the fastest-aging society in the world, where 28 percent of the population are over 65, which is the main reason that per-capita GDP has stagnated.
Based solely on the working age population aged 15 to 64, Japan's per-capita GDP of $57,500 is still much higher than Korea's $46,000 and Taiwan's $51,000. Korea is expected to become a super-aged society in 2025 with more than 20 percent of the population aged over 65.
Korea's birthrate, meanwhile, stands at just 0.8, which is even lower than Japan's 1.3, meaning it can easily fall into the same trap as Japan in the next decade.
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