When in July 2017 the European Union (EU) and Japan announced they had reached an agreement in principle on what would be a milestone free trade deal – one of the most important bilateral trade agreements ever concluded by the EU – and a separate Strategic Partnership to tackle issues such as climate change and cyber-security, Japanese Prime Minister Shinzo Abe called it “the creation of the world’s largest free, advanced, industrialized economic zone”. For Japan, this was, both literally and metaphorically, a big deal. Following hot on the heels of the collapse of the long-awaited Trans-Pacific Partnership (TPP) trade agreement between Japan, the U.S. and other Pacific Rim countries, some commentators believed it could herald a much-needed return to growth for the Japanese economy. Now, with political agreement paving the way for the new and far-reaching trade agreement with the EU, experts predict that Japan could see a full turnaround in its economic fortune, even though GDP contracted in 2018 Q1, ending two-year run of growth.
Once a model of economic prosperity, the world’s third-largest economy had been hit hard after the Tokyo stock market crash of the early 1990s, experiencing deflation and stagnation. It has also been grappling with an aging population that has presented government and business with multiple challenges.