Yet South Korea is now beset by some of the same structural problems Japan faced during its two decades of stagnation: rapid population aging, labor-market inefficiency, institutional weakness, and low productivity in the service sector.
In the 1990s, South Korea waited for matters to come to a head before responding. This time, it must nip the incipient crisis in the bud. That means accelerating domestic structural reforms to improve productivity, enhance labor-market efficiency, upgrade institutions, and foster a business environment that supports modern service industries and innovative start-ups. It also means strengthening both economic and diplomatic ties with major countries, while working with the US and China, in particular, to end the North Korean nuclear standoff.