As China’s economy has boomed over the past two decades, predictions that Beijing will soon dominate the world economy are everywhere. China is not the first Asian country that appeared on track for economic dominance accompanied by growing geopolitical power. While President Donald Trump’s trade war with China mutates into a tech war—most notably via new export controls and a global assault on Chinese telecom firm Huawei—the parallels between Japan in the 1980s and China today are striking. What can interpretations of Japan in the 1980s say about predictions of China’s future today?

There are, of course, key differences between Japan then and China today. Japan in the 1980s was a single-party democracy; China today is a single-party authoritarian government. Japan was a treaty ally reliant on U.S. security guarantees; China is geopolitical competitor. Japan was already rich when it became embroiled in economic rivalry with the United States; the Chinese are, on average, still relatively poor. And Japan’s economic growth rate collapsed after the 1980s, deflating Tokyo’s expansive hopes, and others’ fears, of Japan’s global influence. That is a key difference with China—at least it has been so far.

These differences notwithstanding, the parallel trade, tech, currency, and geopolitical clashes between the United States and China make understanding potential historical parallels as important as ever. This essay reviews three prominent books on Japan published in the late 1980s. Assessing what they got right and wrong—and why—suggests where we should look when trying to understand the future of China’s economy and its trade ties with the rest of the world. A common and often fatal error in forecasting is to project past trends linearly into the future. This error imperiled many who tried seeing into Japan’s future in the 1980s.

Continue reading…