Japanese high technology industrial policy in comparative context

Perceptions of Japanese industrial policy have entered the American debate on economic policy in two major ways: as a possible model to emulate in developing a United States industrial policy; and as a shaper of Japanese industrial structure and comparative advantage, especially vis à vis major American industries. The main purpose of this chapter is to provide a general assessment of Japanese industrial policy -- its successes and its failures -- because that is an obvious requisite for those attempting to derive possible lessons and implications for United States policy

Japan: Another economic recovery, new political terrain

This paper reviews Japan's recent economic performance through the first half of 2005, as well as the economic implications of Koizumi's snap election. After a disappointing final 3 quarters in 2004, first quarter growth in 2005 was a strong 5.8 percent annual rate, followed by a reassuring second quarter at 3.3 percent annual rate. Slow gradual improvements across the economy can be expected to continue, but achieving sustained full employment economic growth depends on whether growth rates over the next five years are closer to 3 percent or 1 percent. The most significant improvement over the past year has been in the labor market. Unemployment dropped to 4.4 percent in July, from its 5.5 percent January 2003 peak, while total employment and employee compensation figures are on the rise. The systemic problem of bank excessive nonperforming loans has been solved. Corporate restructuring proceeds, albeit in the light of new worries over hostile takeover bids. Despite improvement in virtually all Japan's economic indicators, most of the major concerns fundamentally persist. Aggregate demand remains inadequate; both deflation and labor market slack continue; household income growth is modest; capital is misallocated; and business borrowing continues to decrease. Koizumi's potent political victory will ensure the necessary postal privatization, although the details of implementation remain unclear. He has yet to define how he will use his public mandate to make other economic reforms, but general optimism prevails. The most difficult fiscal challenge will be to successfully navigate tax increases without inhibiting economic growth. The Bank of Japan faces two challenges: reducing the quantitative target, and proceeding to exit the current ZIRP monetary policy. Internationally, Japan must forge productive political relationships with its regional economic partners, specifically China, and continue to work towards greater East Asian economic corporation

One World, Two Worlds or Three? Reflections on the New International Economic Order

Hugh Patrick is R.D. Calkins Professor of International Business and Director of the Center on Japanese Economy and Business at the Graduate School of Business, Columbia University. This paper originated as a lecture given at the Asia Society in Hong Kong, January 16,1992

Experiencing the March 11, 2011 Earthquake

This report serves three purposes: to record my observations and impressions from being in Tokyo before and after the March 11 earthquake; to summarize trips to Kobe and across Honshu to the Japan Sea coastal area; and to provide some thoughts as further information became available during April. Japan now faces its worst crisis since World War II. The earthquake quickly became a triple disaster. The immense tsunami generated by the earthquake hit the Iwate, Miyagi, and Fukushima prefecture coastlines with great devastation and loss of more than 22,000 lives. The tsunami also crippled the Fukushima Dai-ichi nuclear power plant, creating potential radiation threats and global repercussions for energy policy. Many of the effects of the triple disaster are long-lasting, and the flow of new, important information requires a continual revision of our understanding. This is particularly true regarding the Fukushima Dai-ichi power plant and electricity shortages, as well as development of energy policy. Accordingly, early May is my cut-off date for new information

Some Thoughts on Japan's Financial Mess

Today I want to discuss several related topics dealing with the Japanese economy and financial system. First, as a prologue I consider the growth prospects of the Japanese economy during the next 4 - 5 years. Second, a related issue which will be the main focus of my speech, one of the serious problems that the Japanese economy faces and will continue to face in the next few years is that of non-performing loans of the banking system. Their current "financial mess" will be the main theme of my talk today

Japan's economy misery: What next?

Sustained poor economic performance and the deepening banking mess are what are making Japanese feel miserable. I feel these problems are about at their worst: there is light at the end of the tunnel. This Foote Lecture traces why Japanese growth was so poor throughout the 1990s and why the banking problems worsened. I then consider the current situation and the policies taken in the wake of the July 12 Upper house election, which are a major turning point for Japanese economic policy, and speculate on economic prospects. Foreign observers have talked about a "Japan crisis" for several years, while Japanese have simply shown pessimism and lack of confidence about the future - the country's and their own. Restoring confidence is a requisite for sustained recovery and growth, and this requires both banking reforms and recovery of sustained economic growth. The new government is in the process of making major commitments to achieve these goals. The political imperative is so great, and the required policy actions are so obvious, that fiscal and monetary stimulus will persist and strengthen, and banking reform will proceed

Crumbling or transforming? Japan's economic success and its postwar economic institutions

The purpose of this paper is to provide an overview of the evolutionary change of three of the major postwar economic institutions: the large firm industrial relations system; the main bank system of large firm corporate finance; and the keiretsu systems of various forms of business ties among groups of firms. In following sections I consider the conditions and circumstances that resulted in the development and flourishing of these institutions; the subsequent developments of the economy that have made these institutions less effective and in some respects now clearly inefficient; how these institutions have responded; and, in a brief conclusion, speculate how they are likely to evolve

Japan's mediocre economic performance persists and fundamental problems remain unresolved

Basically Japan’s mediocre economic performance continues. Even more dismaying has been the persistence of the same major macro, financial, and structural problems that have plagued Japan for some years now – inadequate aggregate demand, huge non-performing loans, corporate excess capacity and low profitability, unemployment, slowness to engage in substantial structural reforms, and so on

Japan's Deep Recession and Protracted Recovery

This paper discusses Japan's deep recession from summer 2008 to spring 2009 and the recovery as of fall 2009, considers near-term and longer-term prospects, and briefly addresses Japan's international economic relations. The August 2009 Diet Lower House election victory by the opposition Democratic Party of Japan (DPJ) heralds a major change in Japanese politics, ending long"term control by the Liberal Democratic Party. While the DPJ proposed significant changes in economic policy in its election campaign, it remains too early to determine just what its economic policies will be in Japan. Japan has a major problem, not just cyclically but structurally: a combination of inadequate domestic demand and its unbalanced composition -- notably a high share of business investment in only slowly growing GDP and a low share of consumption yet little household saving. A further major concern is the persistence of mild deflation for the foreseeable future. Both suggest the need for significant further macroeconomic stimulus to jump-start economic recovery in order to generate full employment sustained growth

The causes of Japan's financial crisis

Japan's financial system, and especially its banking system, today are in substantial trouble, epitomized by the bad loan problems. This paper provides an overview of the major causes of the current banking mess. Fundamental forces include the transformation of the Japanese economy in the mid-1970s from one of excess investment demand to excess savings surplus, and with successful growth the development of a number of strong, increasingly companies. The paper briefly discusses four major causes that were particularly important: failure to create a prudential regulatory system as deregulation proceeded; the creation and then bursting of the stock and real estate market bubbles; globalization; and the high rate of financial innovation. A series of five major macroeconomic policy mistakes are identified as retarding the recovery of the economy, and indeed the late 1996 policy errors led to the 1987-98 recession. Japan's 1990s poor economic performance has made the banking problems more severe and costly, as hopes were dashed that the economic recovery would reduce the bad loan adjustment process