Economic Growth of Japan Cross Term Paper
- Length: 10 pages
- Sources: 10
- Subject: History - Asian
- Type: Term Paper
- Paper: #7404987
Excerpt from Term Paper :
This "crippled operations" not only in local businesses but in companies located in the most affected regions that supplied materials for manufacturing. In other words, Japan suffered from a shutdown of many companies that provided certain parts for cars and electronics. For example, the area that was slammed by the tsunami was a "supplier hub" where companies like Hitachi produced special parts -- including a "…$2 sensor that is part of a $90 airflow sensor used in engines for many vehicles" at the Hitachi plant (Rice, 2011, p. 29). But the shortages of certain parts also had an affect on companies in the United States; to wit, General Motors' engine plant in New York ran out of parts (that are normally manufactured in Japan) so it had to shut down its New York and European plants (Rice, 29).
Even the Apple iPad2, which was officially launched to the public on the very day the earthquake and tsunami hit, was affected by the hit to Japan; five separate suppliers of materials (including a supplier of a "particular polymer resin used in making the batteries) to Apple were out of commission for a time (Rice, 29). The author recommends that companies learn from this disaster, and plan for backup systems in the future. That is because Japan's economy is not just based on what companies produce in Japan, it is also based on how well Japan's technology companies can produce parts that are needed overseas, parts that auto and technology companies need to produce their own goods (Rice, 31).
Wong explains in his 2010 scholarly article that an increase in the volatility of terms of trade that Japan is involved with -- for both autos and technologies -- would have a negative impact on the GDP per capita. An increase in price of the commodity would have a negative impact terms of trade. The major finding of Wong's research is that it is crucial to adopt favorable and less volatile terms of trade in order to sustain effective, economic growth.
The Literature -- Economic Growth of Japan - Kojima
An article written well before the tsunami and earthquake devastated parts of Japan explains how Japan came back strong from the financial and economic crisis that hit the country in 2008. Akira Kojima explains that after Japan had enjoyed the longest period of sustained economic growth in its history -- from the end of WWII to about 2007. The economic crisis was not started by Japan, but Japan was affected by it, as much of the world's economies were as well. Indeed, the world's financial losses during this crisis added up to "four trillion dollars" and Japan's loses were near to $150 billion, about 4% of the global losses (Kojima, 17). At the time Japan was pulling out of the mire of the worldwide economic slump, Japan was "forced to reduce its degree of reliance on exports to the U.S." And moreover, Japan faced the task of using the "twin drivers of foreign demand and domestic demand" to promote its expansion" (Kojima, 2009, p. 15).
On the subject of exports, in January 2009 Japan's exports fell by 30.9% compared with January 2008, and was down even further in February, 2009, dipping to around 40% of what exports were in February 2008 (Kojima, 16). The export slow-down reduced the entire Japanese economy by 12.8%, a huge negative drop, and to give an example of how much exports are a part of the Japanese economy, some 75% of the 12.8% drop in GDP was due to the stall in exports to the West (and elsewhere) (Kojima, 16). Again, these data are pertinent in terms of showing Japan's fiscal troubles and how the nation went about balancing its books, but all of this took place 2 years prior to the devastating earthquake and tsunami.
To right itself from the 2008 slow-down Japan began to realize that it needed "greater diversity in the regions to which it exports," and indeed the country had been relying on U.S. purchases of Japanese exports for too many years. A White Paper on International Trade, referenced by Kojima, claimed that what contributed to the crisis for Japan was in part due to the fact that Japan was marketing high-end items, like high-priced cars and electronics, to European markets, but in Asia there were about 880 million people considered to be in the middle class, and this, it was recommended by the White Paper, is where Japan should target some of its marketing (Kojima, 23).
The Literature -- Economic Growth of Japan -- OECD Economic Outlook
Meanwhile after going through a serious series of economic setbacks and crises, and getting the economy back on track by 2009-2010, the horrifying earthquake and tsunami caused serious problems for the culture, for the community, and indeed for the economy. However, as mentioned previously, Japanese people have been through a lot -- including atomic bombs that destroyed Hiroshima and Nagasaki in 1945 -- and they are resilient. An article in the OECD Economic Outlook publication reflects that the Japanese economy began to rebound in just a few months following the earthquake and tsunami. The OECD is the Organization for Economic Cooperation and Development, and the OECD financial data shows Japan's economic growth up about 2% in the year 2012 (OECD, 75). In spite of the calamity and its resulting disruption of normal life for the Japanese people, and despite great shortages of electricity (due to the damage to the Fukushima nuclear plant and other nuclear issues) along with supply chain disruptions, industrial production in Japan "…has risen to within 8% of its pre-earthquake peak" (OECD Economic Outlook). Moreover, the Japanese government has responded to the need to rebuild with a spending package valued about "…19 trillion yen (about 4% of GDP) over five years for reconstruction following the disaster" (OECD, 75). The damage in fact was "officially estimated at around 3-1/2% of GDP," and private spending is being beefed up by businesses and residential investment to create housing for those displaced by the tsunami.
Beyond the investments mentioned in the paragraph above, Japan also plans to institute "temporary tax hikes" in 2013 that may last as long as 25 years; in addition, there will be "surcharges on personal and corporate tax income" -- all in the name of getting Japan back in the black and getting its infrastructure and its auto and electronics manufacturing centers operating at full capacity (OECD, p. 76). The Bank of Japan has been helping out the financial rebuilding in Japan by keeping the "policy interest rate at close to zero," and in fact the bank has authorized another 5 to 35 trillion yen (7% of Japan's GDP) to be loaned out at low or no interest rates, to help stabilize the economy.
It was mentioned earlier that Japan has slowed down its reliance on nuclear plants for electricity; the OECD paper (p. 78) notes that "…most of Japan's nuclear power plants, which supplied almost one-third of the country's electricity, have been closed for safety checks." While those plants provided about a third of the electricity for the country, if they stay closed it could put a damper on the rebounding economy post earthquake / tsunami. The OECD warns that because Japan has a budget deficit of 9-1/2 of GDP, the country does not have the resources to back up any additional weaknesses in economic activity. In addition, the OECD fiscal data shows that Japan must integrate into the global economy more completely, and that means marketing medium priced cars and electronic products to middle class Asians, instead of selling high-end products (and cars) to America and Europe (79).
The Literature - Japan's Political Leaders' Mistaken Assumptions
Writing in the peer-reviewed British Journal of Industrial Relations, Ji-Whan Yun explains that "income inequality" is growing among the Japanese workforce "at an alarming rate" and the blame can be heaped on politicians and policymakers (Yun, 2010, p. 4). The author of this article notes that the rate of poverty of those 66 to 75 years of age is 20%, and that highly trained it professionals receive "super" salaries while recent college graduates in Japan are left behind. In terms of who is to blame for these widening labor disparities, the politicians blame "…increasing international competition… [caused by] globalization and the differing abilities of companies to adjust to the it revolution" (Yun, 4). The Prime Minister of Japan, Koizumi, asserts that the economic inequality in Japan is due to "demographic phenomenon" that was caused by the increasing number of "older households" (Yun, 4).
Yun asserts that it is "misleading" for the government to argue that market changes are "…independent of government control"; in fact, Yun continues, the Japanese government "has driven and encouraged" these labor inequalities (Yun, 4). Moreover, the political power structure in Japan has reduced "current benefits" that those on welfare are entitled to; also,…