Tokyo (SCCIJ) – At the SCCIJ February Luncheon 2026, more than 80 members and guests gathered in Tokyo for an exceptional keynote by Prof. Masaaki Shirakawa, former Governor of the Bank of Japan, who shared a rare and comprehensive perspective on Japan’s economic outlook in comparison with Switzerland. Drawing on decades of academic leadership and central banking experience, Prof. Shirakawa provided a nuanced analysis of exchange rate dynamics, structural challenges, demographic pressures, and the societal choices shaping Japan’s long-term trajectory. His keynote offered a balanced, evidence-based reflection on what Japan can learn from Switzerland, and why navigating demographic and productivity shifts is key to sustaining future growth.
Professor Shirakawa, your talk highlights major changes in the yen over the last decade. What is driving this depreciation?
Prof. Shirakawa: Until around 2012, the Japanese yen was widely viewed as a strong, “safe-haven” currency – much like the Swiss franc. But over the past decade, this has fundamentally changed. The yen’s depreciation reflects both structural and cyclical forces. Structurally, Japan’s trade balance has shifted toward deficit, outward foreign direct investment has increased sharply, and the growth rate has weakened due to population decline. Cyclically, monetary policy in Japan has remained far more accommodative than in other economies, widening the interest rate gap. These combined factors have led to a persistent weakening of the yen.
How do Japan’s long-term economic challenges compare with Switzerland’s?
Prof. Shirakawa: Both countries shared similarities for many years – stable inflation, strong currencies (historically), and high social welfare indicators. But Japan faces more severe demographic pressures. Working-age population has declined by 16% since 1995, and productivity growth is slowing due to demographic aging, lifetime employment practices, and slow resource reallocation. Switzerland, by contrast, has maintained more flexible structures and successfully integrated foreign workers, helping sustain productivity and global competitiveness.
You mentioned that Japan’s social welfare has increased even as GDP growth slowed. Could you elaborate?
Prof. Shirakawa: Yes. If we look beyond GDP alone, Japan has made significant progress in areas such as life expectancy, reduction of excessive work hours, and income equality. These factors contribute to a high standard of living. However, this comfortable equilibrium is not sustainable without structural reform, given declining population. Demographics and technology are reshaping the economy, and Japan must adapt by improving labor mobility, integrating more foreign workers, and encouraging gender equality in management roles.
What are the key areas where reform is needed most?
Prof. Shirakawa: Three areas stand out: Labor market flexibility, particularly resource reallocation from low-efficiency to high-efficiency sectors. Fertility support, including changes in social norms – such as men’s participation in housework and childcare, which correlates strongly with higher birth rates internationally. Productivity enhancement, not only through technology like AI, but by enabling companies to reorganize, innovate, and adjust to demographic trends.
The strongest driver of reform today is the reality of labor shortages. This pressure may finally accelerate long-needed transformations.
You closed your talk with a comparison between Japan and Switzerland. What does Japan admire most about Switzerland?
Prof. Shirakawa: Switzerland offers several inspiring lessons. Its large companies are truly global; its sovereign credit rating remains among the world’s highest; and it integrates foreign workers effectively. Perhaps most importantly, Switzerland is not overly concerned with mild deflation or currency appreciation – the Swiss National Bank (SNB) adjusts interest rates flexibly, focusing on long-term stability rather than short-term pressures. These are valuable contrasts as Japan reflects on its own economic and societal future.
About the Speaker
Prof. Masaaki Shirakawa served as Governor of the Bank of Japan from 2008 to 2013 and is one of Japan’s most respected voices on monetary policy, financial stability, and macroeconomic strategy. He has held key academic roles at Kyoto University and has long-standing professional ties with Switzerland. Prof. Shirakawa continues to contribute as a leading commentator on Japan’s structural challenges, international monetary policy, and the global economy.
Text and pictures: SCCIJ
