Essays on Japan from 1980 to 2007 - the Rise and Fall of Japans Economy Case Study

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The paper "Japan from 1980 to 2007 - the Rise and Fall of Japan’ s Economy" is a perfect example of a macro and macroeconomics case study.   Japan had been the second-largest economy in the world after the USA for the period starting 1968 to 2010 when it lost its position to China. In the 1960s and 1970s, the economic growth rate for Japan was 10% in average followed by 5% in 1970s and lastly 4%in 1980s. The 1970s saw the exports increase in the country’ s industrial products resulting in international friction from large Europe traders. For the first time, Japan adopted a system of floating exchange rate in February 1973, the country’ s economy remained stable through 1973 October when war broke in the Middle East resulting in a serious oil crisis.

For the first time, negative economic growth was registered. This recurred in 1978 resulting in a second global oil crisis. It prompted the Japanese to change their industries form depending too much on oil to saving energy. This was a solution to inflation in the country. (Alchian, and Benjamin, 1973, p. 180) The country industries expanding in the 1980s, this was in connection with the yen appreciating; trade was destabilized in advanced industrial countries.

To reinforce this, Nippon Telegraph, Japan National Railway and Telephone Public Corporation were converted to Private Corporation. These saw economic growths resulting from domestic demand succeed. The Rise and Fall of Japan’ s Economy Bubble economy in Japan exploded toward the end of 1980s marked the end of Japan’ s thriving economy as well as stoppage of growth in foreign trade. During the late 1980s, the country’ s economy was thriving, it was enjoying favourable condition, this was characterised by the high employment rates and good wholesale prices.

The revenue and profits made by the corporation were also highest during this time with very low corporate failures being registered. At this point, manufacturers like those making the semiconductors were at the optimal level in their activities. There were high rates of appreciation in value for land and stock. Stock and land prices continued to rise rapidly, and large-scale urban development’ s and resort facility developments in rural areas progressed at a very fast pace. (Noguchi, 1994, pp.

301-330) However, excessive funds flowed into the stock and real estate markets, causing abnormal increases in capital asset values. The change in Japan's net worth has reflected the status of its economy well. At the end of 1980, Japan's national wealth stood at 1,363 trillion yen, 5.6 times its GDP. It then increased, reaching 3,531 trillion yen, 8.0 times GDP, at the end of 1990; this was largely attributed to increasing land and stock prices. The subsequent collapse of the bubble economy resulted in Japan's national wealth dropping to 2,712 trillion yen by the end of 2009. The land was the highest appreciating with Tokyo affected the most.

Japan managed to balance high growth rate together with the high inflation rate for assets. This can be attributed to the central bank, which was operated based on the bureaucracy that resisted the political party influence. (Alchian, and Benjamin, 1973, p. 180) Upon realizing the problem, the ruling party was up against the ministry of finance and the ministry of finance shifted the blame back to the government for too much power granted to the central bank.

The Japanese yen had always fluctuated in value but also appreciated in value for the last twenty-five year; this was good on the side of the currency monitory policy in Japan. At the beginning of 1990, stock prices plummeted, followed by sharp declines in land prices. This marked the start of a major economic recession.

References

1. Ohno, K. 2002. Nihon Keizai, Micro karano Saisei o (Renewal of Japan's Economy Begins from Microeconomic Cleanup), [in text citation: Ohno, 2002]

2. Alchian, A. A., and Benjamin K., 1973. On A Correct Measure of Inflation, Journal of Money, Credit, and Banking [in textual citation: Alchian, and Benjamin, 1973, p. 180].

3. Blanchard, O. J., and Watson, M., 1994. Economic and Financial Structure, Fluctuations across Countries: Measurement, Determinants and Monetary Policy Implications, [in textual citation: Blanchard, and Watson, 1994. P. 103]

4. Craig, F, and Philip, P. 2001. Procyclicality of the Financial System and Financial Stability: Issues and Policy Options, in Marrying the Macro- and Micro prudential Dimensions of Financial Stability, BIS Papers, [in textual citation: Craig, and Philip, 2001. pp. 8-54].

5. Kindleberger, C. P., 1995. Asset Inflation and Monetary Policy: BNL Quarterly Review No. 192, [in textual citation: Kindleberger, 1995, pp. 19-47].

6. Shimizu, Tokiko, and Shigenori Shiratsuka, “The Credit Risk of Japanese Banks during the Bubble Period: A Pilot Study of Macro Stress Simulation,” IMES Discussion Paper, No. 2000-E-31, Institute for Monetary and Economic Studies, Bank of Japan, 2000. [ in textual citation: Shimizu and Shigenori, 2003,pp. 6-34]

7. Miyazaki, Y.1990. The Dollar and the Yen Japanese Economic Studies Journal Fall 1990 Vol 19, No 1[in textual citation: Miyazaki, 1990, pp. 6-34]

8. Nikami, K (1990) Management of Japan's Securities Companies Japanese Economic Studies Journal Fall 1990 Vol 19, No 1[in textual citation: Nikami, 1990, pp. 40-69]

9. Noguchi, Y. 1994. The "Bubble" and Economic policies in the 1980s Journal of Japanese Studies Summer 1994 Vol 20 No 2 [in textual citation: Noguchi, 1994, pp. 301-330]

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