An Assessment of Structural Reforms in Korea: Implications for Economic Revival in Japan

Abstract

Prior to the economic crisis, realestate prices, wage rates, interest rates, and the exchange rate had been derailed on a large scale from the levels reflective of Korea's economic fundamentals, This distortion was the ultimate source of Korea's economic crisis but was remedied only partially during the last five years, leaving the task of economic reform as incomplete. Although a consensus view about the fundamental source of Japan's economic problems has not yet emerged, a chronology of Japan's lost decade casts doubts about the popular view that financial reform is the sufficient condition for a durable recovery in Japan, We suggest that Japan's effort should be directed to improving productivity of nontradable service sector and to solving the problem of population aging.