There was a time when Japan was among the most dynamic countries in Asia, but where Asia’s others major cities like Shanghai, Mumbai and Jakarta continue to forge ahead dynamically, Japan lives in a state of inertia. Growth is almost nonexistent and this year the nation would probably lose its prized status as the No.2 global economy to China. Some of the major issues that afflict Japan include a fiscal disaster, weakening competitiveness and an aging society. The country is still doggedly pursuing the same growth model that helped it during its years of booming growth. The extreme devotion to manufacturing and exports and policymaking led by the bureaucracy do not apply anymore to Japan's present high-cost economy. But the country refuses to discard this model.

Source: Time