Economic Growth of Japan
Cross Cultural Perspectives
Ms. Emily Archer
Economic Growth of Japan
Japan boasts one of the strongest economies in the world. In terms of capacity, Japan’s economy ranks third after the United States and China. Extensive emphasis on the technology, which acts as one of the strongest resources of the country, has thrust Japan into a world economic power. The emphasis on technology has helped Japan become one of the greatest automobile manufacturing countries. Although recently challenged by the emerging electronic and automobile technologies of Korea, Japan’s highly successful electronics industry focuses on the cameras, computers, music and video-related products. International trade relations have contributed significantly to the development of the country’s GDP. Japan’s powerhouse economic engines — and its people — were seriously challenged in March 2011 by one of the most severe earthquakes — and tsunamis — experienced in Asia in many years. But although Japan has many government-related problems, including a struggling labor force, unemployment and disenfranchised youth, in the main Japan is bouncing back fairly well from that disaster.
Thesis: Notwithstanding the calamitous 9.0 earthquake, followed by an extraordinarily destructive tsunami that wiped out entire towns and took the lives of 15,854 people (in addition, 3,155 are listed as missing) — and caused radiation from a nuclear plant to be leaked into the air and the sea — Japan is coming back strong. The people of Japan are well educated, proud and resilient, and based on the economic structure it has worked hard to develop since the end of WWII, and notwithstanding temporary problems with unemployment and cutbacks by the government of certain benefits for workers and welfare recipients, Japan has the capacity to continue uninterrupted as a world economic power.
The Literature — Economic Growth of Japan — From Militarism to Production
Anne Allison writes in the Anthropological Quarterly that it was not an easy task for Japan to rebuild after World War II. The nation had been propagandized into believing it was an empire builder through militarism, but after Nagasaki and Hiroshima were blown away by the forces of the first atomic bombs ever dropped on populated cities, it was time for citizens to roll up their sleeves and “work hard” (Allison, 2012, p. 351). They were urged to work hard “not to win a war but to increase prosperity at home,” and due to the “economic miracle” that Japan accomplished in the post-WWII years, the country gained “â€¦the global prestige that had eluded it as a would-be imperial power” (Allison, 351).
By the late 1980s, about 90% of Japanese citizens were considered part of the middle class, and working hard meant that a person might well afford a home “â€¦stocked with the newest domestic electronics — washing machines, color TVs, automobiles” and more (Allison, 351). The country experienced what Allison calls “reproductive futurism,” that is, seeing one’s future in the faces and images of children. At this point in the article Allison doesn’t allude to the earthquake and tsunami when she asserts that “â€¦today, things seem to have stalled. The economy is stuck, jobs have been lost, and kids are no long being born like they used to” (352).
The author is alluding to the “â€¦reemergence of poverty in Japan,” echoing what happened after World War II. She backs up her assertions of poverty by pointing out that Japanese youth “feel stuck” because they are “succumbing to the ‘precariat,’ precarious proletariat or working poor” (353). Indeed about half of the Japanese workers between the ages of 15 and 24 are “â€¦irregularly employed which means no job security, no benefits, and wages that are static and low” (Allison, 353). And upwards of three quarters of those who are “irregularly employed” earn less than 2,000,000 yen ($26,000) a year, putting them in the ranks of the working poor (Allison, 353).
Many of those out of work or barely eking out an existence find “home” in what Japanese call “net cafes,” which offer a “cubicle or reclining chair” for about $15 to $26 a night. These cafe dwellers are part of what Allison calls Japan’s “floating population of flexible workers,” are actually the mainly young people that are the “drifting poor”; they have no permanent homes and live on the streets if they can’t afford a net cafe (353-54). These young people don’t protest against the policies in Japan, Allison explains; they “simply don’t participate in it (355). And many of those young people that Allison interviewed in a recent research project explained to her that they were “â€¦socially disinterested, disinvested,” and “depressed” (355). Given these depressing statistics, it is no surprise that “â€¦60% of all those who commit suicide are jobless” (Allison, 346). These data and social reports indicate that while Japan has a reputation as an economic powerhouse, and despite recent setbacks Japan remains a world powerhouse economically. Still it is only fair to include the darker economic news with the more well-known side of the country, and that is its tremendously successful history of exporting cars and electronics.
Some authors, like C. Chandler, explain that that as far as the workforce in Japan, there is an absence of women employed in key position in companies, and he references what he calls “the narrow-mindedness of the youths in the society” (Chandler, 2012). It is clear that the number of Japanese students abroad is on the decline, and is contributing towards “insularity among the youth” he continues.
An article by C. Belanger offers general knowledge of the country, including environmental and geographical background as well as data on the animals and plants that characterize Japan. Through the article, researchers get to know the climatic conditions of Japan, and aside from the earthquake and tsunami disaster, and the radiation leaks, Japan is a fairly stable and ecologically sound nation.
The Literature — Economic Growth of Japan – Oshima
Why is it general knowledge in the literature and in the worldwide conversation about Japan that this island nation will not be stymied for long notwithstanding the tsunami disaster? For one thing, even though Japanese people are now justifiable wary of electricity produced by nuclear plants — and many nervous citizens carry miniature devices that can detect radiation following the meltdown of the Fukushima plant — Japanese journalist Keiji Oshima explains in a peer-reviewed article that new clean energy systems will be built through Japanese technological know-how to replace the electricity that nuclear power once produced so efficiently.
There is naturally an increased demand for electricity in the country — to rebuild the economy and keep factories going that produce the technologies that Japan markets all over the world — and Japan is in a position to become a leader in building renewable energy sources, like solar, Oshima explains (Oshima, 2011, p. 90). These solar technologies will of course help fill in the gaps left by the shutdown of the nuclear plants, but they will also help Japan’s exports to the West, where there is an urgency to slow down global warming by replacing coal and oil-fired plants with renewable systems.
Oshima asserts that because Japan is the world’s leading manufacturer of lithium ion rechargeable batteries (which are needed to store electricity created by solar collectors, and are used in the hybrid autos that Japanese auto industry produces) the country has a product that is in great demand, helping the country stabilize its economic system. attempting to get back to the top of the world economies despite the setback of the natural disaster in the form of earthquake. Showing the classic Japanese ability for positive thinking, Oshima concludes his essay with the thought that Japan can “â€¦foster a new future where only safe, eco-friendly, and renewable energy sources are used so that our planet can sustain itself in the long run” (Oshima, 91).
The parts of Japan’s culture that has played vital roles in the growth and development of Japan include: an enhanced education system and structures, quality healthcare, human capital development, automobile manufacturing sector, electronic industry, resources, effective and efficient government system, and technology.
D. Ryan has conducted extensive statistical research in the Japan Country Monitor that there is the real prospect of constant or flat GDP levels in Japan in the near future. This is mainly because of the natural disasters (tsunami and earthquake). According to Ryan’s article, consumer price inflation has been on the rise in the past year (Ryan, 2011). The article also recognizes that the continuous growth in the strength of the currency is not the main problem that the country faces towards revival. GDP of the country is also recovering having been on the decline in the first three quarters of 2011. The article illustrates appropriate measures essential for revival, include maintaining the constant interest rates in order to attract new investors to the economy.
The Literature — System Breakdowns after the Earthquake / Tsunami
James B. Rice is logistics and transportation director at Massachusetts Institute of Technology (MIT), and he writes in the peer-reviewed journal Mechanical Engineering that after the tsunami — and the resulting loss of electrical power — there were “rolling blackouts” for weeks. 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 “â€¦$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 “â€¦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 “â€¦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 “â€¦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 “â€¦increasing international competitionâ€¦ [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 “â€¦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, the government has enacted legislation that reduces insurance benefits, that restricts benefits to “marginal workers,” and has “reallocated” the funds it would have distributed to the unemployed and destitute to “â€¦subsidize firms’ retraining program rather than targeting problem groups at higher risk of unemployment” (Yun, 5).
In conclusion, while Japan has done great work in its efforts to recover economically from the devastation of the earthquake and tsunami, as noted in this paper, it still has a lot of problems to work out. Japan has a struggling labor force, many young people are out of work or otherwise disenfranchised from the society, and a substantial percentage of older people are unemployed as well. Still, the Japanese culture is strong and resilient and can be expected to remain strong as problems are worked out politically and new sources of electrical energy production are developed. Japan is a world economic power and will remain a world economic power, for all the reasons pointed to in this paper.
Works Cited / References
Allison, Anne. (2012). Ordinary Refugees: Social Precarity and Soul in 21st Century Japan.
Anthropological Quarterly, 85(2), 345-370.
Belanger, C. (2011). Japan. Our World: Japan, 1.
Chandler, C. (2012). JAPAN ONE YEAR LATER. Time International (South Pacific Edition), 179(10), 26.
Kojima, a. (2009). Japan’s Economy and the Global Financial Crisis. Asia-Pacific Review, 16(2), 15-25. Doi: 10.1080/13439000903395667
OECD Economic Outlook. (2011). Development in Individual OECD Countries. Retrieved June 8, 2012, from EBSCO Host.
Oshima, Keiji. (2011). Can Japan Come Back from This Major Disaster? Vikalpa, 36(2). 89-91.
Rice, James B. (2011). Only as Strong as the Weakest Link. Mechanical Engineering, 133(6),
Ryan, D. (2011). Japan. Japan Country Monitor, 49-57.
Yun, Ji-Whan. (2010). Unequal Japan: Conservative Corporatism and Labour Market
Disparities. British Journal of Industrial Relations, 48(1), 1-25.
Wong, H. (2010). Terms of Trade and Economic Growth in Japan and Korea: An Empirical
Analysis. Empirical Economics, 38(1), 139-158.