Some Missing Elements

macroeconomics

Japan's Financial Problems

macroeconomics, Japan, Financial Problems

Japan Post Bank: Problematic Issues

Japan, like many countries, has long offered savings deposits through the postal system. That system has undergone some reform over the past dozen years, and beginning in 2007 the system was to undergo privatization, with Japan Post Bank eventually becoming an independent entity. A new law passed in 2012 has stalled the privatization process. Regardless of how the issue of privatization plays out, the existence of a savings bank embedded within the postal system raises a number of troubling issues. This essay addresses five of those problems: a level playing field, market power, cross subsidization, social policy, and risk or inefficiency. These issues concern the fairness of competition within the banking industry, future financial stability of the Japan Post Bank, and broader economic inefficiency within the Japanese economy. This essay argues that government ownership of Japan Post Bank is unjustified on economic or social grounds. Complete privatization should resolve some of the problems, especially that of a level playing field. But issues of economic inefficiency and future financial stability could remain even after privatization

Fundamental issues in the United States-Japan economic relations

This paper is quite different from the usual Japan Economic Seminar presentation. Rather than a piece of original research, this paper is a summary of personal views and reflections about the current status of the U.S.-Japan economic relationship. The purpose is to stimulate discussion at our seminar meeting about the relationship, somewhat in continuation of what transpired at the seminar's Washington meeting concerning Marcus Noland's paper. If there is a theme or conclusion to the following pages, it is that economists need to be less purely academic in their approach to bilateral issues. Important problems do exist in the bilateral relationship; they are not all necessarily true economic problems, but neither are they simply "political" issues which economists tend to view with disdain. Dealing with these problems obviously requires tact and diplomacy, but they can be ignored only at the peril of seriously damaging the overall economic and strategic relationship. Especially now that the cold war is over, and economic aspects of the U.S.-Japan relationship are receiving relatively more attention than in the past, economists have a responsibility to be closely involved in considering the nature of the problems and their possible solutions

Japan's Economic Mess

Japan has experienced very slow economic growth, a large bad problem, and an outbreak of economic scandals in the 1990s. This paper analyzes what has gone wrong with Japan, both in terms of macroeconomic performance and financial sector problems. The macroeconomic malaise is the direct result of the excesses of the bubble--especially the collapse of stock market and real estate prices in the 1990s. But the government exacerbated and prolonged the problem by raising taxes substantially in 1997 just as the economy was beginning to show signs of recovery. The financial sector bad debt problems are also an obvious outcome of the collapse in asset prices, but were also an inherent danger in Japan’s bank centered financial center. The paper argues that the financial system, which may have been useful or at least workable, in earlier postwar years, had atrophied, leaving bankers less attentive to evaluation of borrowers. In addition, the system may have always involved a certain amount of corruption which worsened in the 1980s and 1990s. This situation cries out for vigorous and thorough reform, principally through failure of insolvent institutions and imposition of extensive deregulation. However, much of government policy remains very disappointing. The Ministry of Finance continues to permit financial institutions to hide their problems, does not favor more bankruptcies, and is not pressing deregulation with any vigor. The “big bang” financial reforms are a useful move on the surface, but the reality once the entire process is completed will be far less helpful than commonly supposed. Overall, the present problems and the government’s response to them remain quite disappointing

The controversy over Japan's low manufactured imports

Relative to other industrial countries, Japan continues to have very low levels of manufactured imports, a distinctive feature that has not been affected substantially by the high value of the yen since 1985. This aspect of Japan has been widely known by economists, but there is still substantial disagreement over the causes of the low level of imports. Can it be ascribed to implicitly protectionist behavior, or can it be explained by standard economic variables? As with most social science questions, the answer is probably a combination of many factors, none of which provides a complete explanation by themselves. This paper reviews the evidence on Japan for both the low level of imports and the low level of intra-industry trade, another pattern of trade which is very substantial for virtually all industrial nations except Japan. A variety of explanations have been offered by economists, political scientists, and business scholars, and these explanations are explored here. A final topic which cannot be ignored is the impact of the rising yen since 1985 and how it is changing Japanese behavior

Japan's role in Asia-Pacific cooperation: Dimensions, prospects, and problems

Japan's relationship with the world and especially with the Asia-Pacific region is changing rapidly. These shifts hold both promise for closer and more productive interactions as well as concerns over the possible exclusive nature of the evolving relationships. The cause of the changes come from the macroeconomic developments considered in Dick Nanto's paper--developments that have produced large net capital outflows and a strong appreciation of the yen. The purpose of this paper is to explore Japan's position in the development of trade and investment ties in the Asia-Pacific region, review the changes now taking place in Japan's relationship toward these countries, and provide some speculation on future developments

Japan Post Insurance: Unjustified Favoritism

Japan Post Insurance is the largest insurance company in Japan - indeed, in the world when measured by assets ($1.1 trillion in March 2013). Beyond the market power of sheer size, government ownership results in undue benefits because it enables inappropriate cross-subsidization, results in inefficiency and heightened risk, and violates international principles of national treatment for foreign firms participating in the domestic market. In short, government ownership raises issues of a tilted playing field. Further, economic theory provides no justification for the existence of Japan Post Insurance (JPI) as a government-owned institution. The obvious conclusion is that JPI needs to be completely privatized in both form and substance. That is, not only should the government-owned Japan Post Holdings sell all shares of JPI to the public, the rules and regulations pertaining to the privatized firm should be identical to those for the rest of the insurance industry. If JPI is not privatized, then the government should regulate it in a manner that avoids the distortions analyzed in this paper

A Retrospective on Abenomics

Shinzo Abe became prime minister in January 2013 in part because he touted a three-pronged coordinated economic plan dubbed “Abenomics.” The goal was to restore the economy to two percent positive inflation and two percent average real GDP growth within two years. Now that he has stepped down, it is time to review his policies and their outcomes. This paper argues that he did not achieve the stated goal. The original set of policies was well conceived, but the policies were not really coordinated and were not aggressively pursued