`Korea to Surpass Japan in Avg. Income by 2031`

Korea will surpass Japan in per capita income in 2031, a major international economics organization said Friday.

IHS Global Insight said in an unpublicized data analysis that average income in Korea will reach 72,432 U.S. dollars in 2031, exceeding Japan’s 71,788 dollars.

The agency said Japan’s per capita GDP this year (41,631 dollars) will be more than double Korea’s (20,715 dollars), but added Korea will continue to narrow this gap every year to overtake Japan in 2031. Korea will then widen its average income lead over Japan with 86,129 dollars to 79,694 dollars in 2035 and 109,617 dollars to 88,575 dollars in 2040, it said.

Goldman Sachs in 2008 had predicted that Korea’s per capita GDP will exceed Japan’s in 2050 to become the world’s second-richest nation but Global Insight’s study has moved up the timeline by nearly 20 years.

Lee Ji-pyong, chief economist at LG Economic Research Institute and an expert on the Japanese economy, said, “IHS Global Insight apparently made this prediction by comprehensively considering exports, consumption, investment, savings, productivity and technological advances as well as economic growth rate and population growth trends.”

“Japan, whose population is more than double that of Korea, will lead Korea in overall GDP in 2031, but the fact that Korea’s per capita GDP will top Japan’s is very significant economically in and of itself.”

Global Insight gathered comprehensive information on 170 industrial sectors in around 200 nations worldwide, and analyzed them by using its expertise and quantitative models before announcing the resulting economic indicators and other data.

○ Overtaking Japan for the first time in 211 years

According to the Groningen Growth and Development Centre of Groningen University in the Netherlands, which calculates historical economic indicators, Japan’s per capita GDP in 1700 was 570 dollars based on purchasing power parity.

China’s was a reported 600 dollars the same year, a level similar to Korea’s. Japan saw exponential economic growth in the 18th century by expanding trade with European nations, including Portugal and Spain. At the time, Europeans records suggested warnings like, “Don’t show anything to the Japanese. They copy things amazingly fast.”

According to the center, Japan’s per capita GDP was 669 dollars in 1820 and began to overtake those of China and Korea (600 dollars). So if Korea overtakes Japan in per capita GDP in 2031, it will have done so for the first time in 211 years.

○ Waning Japan being chased by Korea

“The Japanese economy faces serious hardships. Japan’s economic status has deteriorated on the global stage, and individual prosperity is also declining.”

Such phrases are often found in numerous documents published by Japan’s economy-related agencies, including the Economy, Trade and Industry Ministry. Various figures also confirm the trend of Korea’s rise and Japan’s fall.

The portion of Japan’s GDP in the global economy declined from 14.3 percent in 1990 to 8.9 percent in 2008. In the annual rankings of national economic competitiveness of the Switzerland-based think tank IMD, Japan also fell from first in 1990 to 27th this year.

Korea beat Japan for the first time in the IMD study by placing 23rd this year, Korea’s highest ranking in the survey’s history.

Experts on the Japanese economy say Tokyo failed to strengthen its manufacturing industry, one of its most competitive sectors, through an ultralow interest rate policy to overcome a prolonged recession of the 1990s.

Compounding Japan’s problems was a falling population resulting from a low birth rate and a rapidly aging society. These factors caused overall economic vitality to wane.

In comparison, the Korean economy grew 0.2 percent last year despite the global financial crisis and is expected to expand at the six-percent level this year.

Hwang In-hak, chief of the industry division at the Federation of Korean Industries, said, “While Japan, which had inflicted hardship on Korea in the past, continued robust growth, Korean companies and people developed a strong competitive spirit and grew determined to overtake Japan. To a certain extent, this spirit has served as a mental catalyst for spurring the Korean economy until today.”

Critics, however, express doubts over the predictions and call them overly rosy. A senior official at a Korean economy-related agency said, “We have tall barriers to overcome, including Japan’s world-class competiveness in parts and components, ample cultural content, the Japanese people’s recognition of their country as an advanced nation, and Korea’s serious trade deficit with Japan.”

These voices say Korea can overtake Japan only by developing a new growth paradigm to replace the virtuous growth cycle, which broke down following the Asian financial crisis.

bookum90@donga.com