“A study claimed that Korea’s per-person gross domestic products will surpass that of Japan by 2020. As the per-capita GDP difference between the two countries is projected to be at the historic low level this year, it seems the journey to catching up with Japan has already begun.”
“The International Monetary Fund recently forecast that Korea’s per-person GDP will be more than that of Japan by 2016 in purchasing power parity terms. Even without the purchasing power parity terms Korea’s per-head GDP in U.S. dollar terms is likely to catch up with Japan’s within five years given the current exchange rate trends.”
“Of course, a higher per-capita GDP than Japan’s doesn’t necessarily mean we are better off materially than the Japanese overnight. In terms of labor’s relative share, Korea is much lower than Japan largely because the share of household income in the GDP is lower for Korea. That’s the same for the share of consumption in total income.”
“Even though the Korean economy’s catching up with the Japanese one is significant by itself symbolically, it doesn’t mean everything will be rosy in the future. In the case of Japan, the increased per-person GDP caused its price competitiveness in the world market to plummet, which in turn made the Japanese economy suffer from deflation and anemic growth for the past few decades.”
—Kang Jung-gu, Research Fellow, LG Economic Research Institute
Korea’s per-capita GDP will surpass the US$40,000 level in 2019 by the International Monetary Fund criteria and in 2020 by the criteria of the Organization for Economic Cooperation and Development, exceeding that of Japan. (image: Kobiz Media / Korea Bizwire)
SEOUL, Nov. 17 (Korea Bizwire) — Kang Jung-gu, research fellow with LG Economic Research Institute, said on November 16 in a report “Per-capita GDP to Surpass That of Japan in 5 Year” that Korea’s per-capita GDP will surpass the US$40,000 level in 2019 by the International Monetary Fund criteria and in 2020 by the criteria of the Organization for Economic Cooperation and Development, exceeding that of Japan.
Up until the 1990s, Japan’s gross domestic products were in excess of $40,000 when Korea barely achieved the $20,000 milestone. According to the International Monetary Fund, the Korean economy would grow 5.2 percent in nominal terms while the Japanese economy 2.2 percent.
Given the current weak yen situation, Japan’s per-head GDP is likely to remain at the $37,000 level for the time being while that for Korea would rise to $27,000, narrowing the difference between Korea and Japan to 1:1.3.
The difference is projected to be narrowed for the coming several years. In terms of purchasing power parity, Korea’s per-capita GDP will overtake that of Japan as early as 2016 as Korea’s overall prices are lower than those of Japan.
For the past five years, Korea’s per-person GDP has risen 55.5 percent, of which 45.3 percent was due to currency effects. (image: Kobiz Media / Korea Bizwire)
According to LG Economic Research Institute, most developed countries experienced strong currencies at the time of breaking the $20,000 per-capita income level. Korea was no exception to this rule, exhibiting a pattern of accelerating income level. For the past five years, Korea’s per-person GDP has risen 55.5 percent, of which 45.3 percent was due to currency effects, the private economic think tank said.
It said, “Gaining higher income through currency effects without concurrent efforts in productivity improvement and innovation is not health for the whole economy and there is no telling whether the Korean economy will experience the same income stagnation as the Japanese.
By Sean Chung (schung10@koreabizwire.com)
