A Japanese national flag stands at the headquarters of the Bank of Japan in Tokyo, in this December 2023 photo. EPA-Yonhap

Koreans often describe Japan as a country that is "close, yet far away."

This expression underscores the notion that, despite cultural and geographical proximity, Japan and Korea maintain a considerable distance in terms of historical, political, and economic perspectives. However, is this perceived gap still as significant today?

Economically, a substantial portion of the data indicates that the two countries share more similarities than differences.

"Currently, all demographic indicators of the Korean economy closely mirror those of Japan, with a delay of about 20 years," Cho Dong-chul, president of the Korea Development Institute, warned. "Korea's nominal gross domestic product (GDP) growth rate, including inflation, strikingly resembles that of Japan as well ... Given the challenges of an aging population and the limits on productivity growth, a deceleration in Korea's economic expansion seems unavoidable," Cho added.

According to the International Monetary Fund's (IMF) annual report in November, Korea is anticipated to achieve an average annual economic growth rate of 2.1 to 2.3 percent until 2028.

Baak Saang-joon, an economist with over two decades of experience in Japan, views the 2 percent growth as "not too bad" for a developed country.

Instead, he suggests that it is time for Korea to shift its focus. Most developed countries, including Japan, have successfully adapted to lower growth rates.

Baak Saang-joon, a professor at Waseda University's School of International Liberal Studies, speaks to The Korea Times at the newspaper's office in Seoul, Dec. 29, 2023. Korea Times photo by Shim Hyun-chul

"The average economic growth rate in Japan stands at only around 1 percent. However, Japan still maintains its status as a developed country. Notably, Japan exhibits a superior employment rate compared to Korea, a higher birthrate, and a considerably lower suicide rate," Baak, a professor at Waseda University's School of International Liberal Studies, said in a recent interview with The Korea Times.

"Korea has already become a super-aging country, so regaining the past glory of 4 to 5 percent growth is challenging. In a society with a declining population, 2 percent GDP growth should be seen as favorable," Baak added.

"My suggestion is to shift the focus: How can we enhance the quality of our country rather than solely focusing on quantity?"

Baak observes that Korea currently faces the same social issues that Japan once experienced. After Japan's economic bubble burst, housing insecurity escalated and the unemployment rate soared. This was accompanied by a halt in the advancement of women's careers and the looming exhaustion of pension funds. These factors contributed to the country's low fertility rate and a loss of economic growth momentum — challenges that Korea is now grappling with.

After a decade of intense debates, Baak said, Japanese society has come to understand the importance of and worked toward improving four key components: employment, housing, old-age support and women's careers.

Japanese people gather to offer New Year prayers at a temple in Narita, Japan, Monday. EPA-Yonhap

As a result, Japan's fertility rate, which had fallen to 1.26 in 2005, rebounded to 1.42 in 2018. In contrast, Korea's fertility rate has steadily decreased from 1.08 in 2005 to 0.77 in 2022.

"In Japan, these issues transcend political and gender divides," Baak explained.

Still, Japan's fertility rate tends to experience ups and downs, following economic fluctuations.

Japan's economy fared well in 2005, but suffered a setback in 2009 due to the global financial crisis. There was a recovery in 2013, but the economy faced challenges again during the U.S.-China conflict and the coronavirus pandemic in 2020.

"The key lesson here is that the fertility rate tends to increase when people's lives are stabilized," the professor said.

In that regard, Baak argues that Japan did not lose three decades. Over the last 10 years, Japan has achieved a social consensus on sensitive issues and enhanced its internal stability as a developed country.

"Korea's strategy — providing subsidies and lowering loan interest rates for new parents — can incentivize those with a stable economic foundation. However, this approach has less of an impact on people in their 20s and 30s who don't have any foundation at all," Baak said.

Entering a period of low growth, Baak believes that enhancing internal stability can provide the national strength needed to sustain a 2 percent growth rate. Furthermore, if corporations perform exceptionally well, there is the potential for the economy to surge to a 3 percent growth rate.

Baak Saang-joon, a professor at Waseda University's School of International Liberal Studies, speaks to The Korea Times at the newspaper's office in Seoul, Dec. 29, 2023. Korea Times photo by Shim Hyun-chul

Recent trends in the Japanese economy also indicated a rebound, characterized by increased foreign investments and consumer spending.

"The Japanese economy can be likened to a 60-year-old man. When a fracture occurs, it doesn't heal as quickly as it would in your 20s. The recovery process is long and challenging. However, there is diligent and effective management at play. The resilience of the Japanese economy largely depends on the efforts of Japanese companies," Baak said.

Despite being a super-aging society, Japan has effectively addressed its resource limitations by investing in research and development (R&D), including space and robotics. Although it has conceded leadership in industries such as steel, automobiles, and semiconductors to Korea and China, Japan still perceives itself as a strong player in those innovative sectors.

"After the economic bubble burst, it wasn't just society that learned lessons; corporations did too. There's now a heightened sense of urgency within these companies, driving a lot of innovation," he explained.

Former Finance Minister Choo Kyung-ho speaks to his Japanese counterpart, Shunichi Suzuki, during a video conference, in this December 2023 photo. Courtesy of Ministry of Economy and Finance

This situation also presents unique opportunities for Korean companies.

Baak points out, "As Japanese companies seek to reduce their dependency on China, they need alternatives. They are now considering partnering with Korean companies to fill that gap. This opens up significant opportunities for Korea."

Caught in the middle of the standoff between the U.S. and China, Baak hopes both Korea and Japan can enhance their industries together.

"Assuming political issues do not create significant barriers, we can expect to see a notable increase in corporate collaborations between Japan and Korea in the coming year," Baak said.

SK Group Chairman Chey Tae-won, who also serves as the head of the Korea Chamber of Commerce and Industry, already suggested economic cooperation between Korea and Japan. His belief is that both countries, having reached their growth limits, could create synergies in diverse fields such as energy, semiconductors and tourism. Such collaboration could significantly expand the combined market size, potentially nearing the 7 trillion won ($5.3 billion) mark.

"The Korean economy will not simply mimic Japan and follow the same path. Just as an individual cannot live his life by merely imitating someone else, a nation's destiny cannot be shaped by just copying another," Baak said.

"However, the advantage for Korea is that it can look to Japan as a precedent and make informed choices by learning from its neighbor's experiences."