Essays on Tobacco Industry Policies in Japan and the USA Essay

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The paper 'Tobacco Industry Policies in Japan and the USA' is a wonderful example of a Business Essay. Industrial policy is any policy the affects a certain set of industries differentially from the rest group of industries that remain. An industry is a set of firms competing in a certain market. A certain market is characterized by the types of goods and services sold by the firm in that industry. Any tax, trade measures, antitrust enforcement measure, standard-setting policy affect the industry in one way or the other can be considered as an industrial policy, this is because it involves the application of governmental resources, reallocation of these resources across the industries. Industrial policies are subdivided into two categories; strategic policies and corrective policies.

Strategic policies promote certain market segments to the advantage of domestic welfare. In this case, domestic firms are provided with subsidy if they are facing stiff competition from international rivals. Subsidy makes these domestic firms become more aggressive while this change in altitude becomes credible to their rivals because it changes the firm's own incentives. When the firms’ production increases at the cost of foreign rivals, shifting monopoly rent from foreign firms to domestic ones once. This aggressiveness also affects the consumer surplus in the market where rivals compete because it causes a fall in prices of products (Brander and Spencer 1983).

Corrective policies on the other hand are meant to improve economic welfare by correcting market failures. Industries can receive assistance from the state when there is the harm caused by the external environments, like the high cost of oil or change in exchange rates. This article compares the tobacco industry policy of two countries namely Japan and Canada.

In Japan, tobacco industrial policy is primarily promoted by the Ministry of Finance and the Ministry of Health, Labor, and welfare. In history tobacco industrial promotion has been a governmental force. The Japanese parliament (Diet) clearly recognizes tobacco as good business for economic growth and good business for the government (Mark Levin 2005). From 1904, the tobacco industry in Japan was sorely owned by the government. This ensured that tax revenues were maximized in a wartime economy and prevented James Buchanan Duke, a powerful American tobacco company from entering the market (Kluger 1996).

Japan’ s tobacco industry developed under monopoly protecting and government control. After the introduction of the Allied Occupation Guidance in 1949, the tobacco business was transferred to Japan Tobacco and Salt Public Corporation (JTSPC) which was headed by the ministry of finance. In the 1980s, various forces pushed the government to restructure its tobacco business. Foreign governments, mostly the USA under the Reagan administration, in favor of tobacco giants Philip Morris put pressure on Japan in trade negotiations to put to an end the monopoly protection regime (Sugarman 2001). Moreover there were domestic pressures over contentious labor-management reforms concerning Japan's major monopolies; Rail, telephone system, and Tobacco.

In 1985, the tobacco industry was finally privatized. The privatized regime concentrated on intense tobacco promotion which boosted the agricultural sector in Japan in a big way. However, they started experiencing lots of pressure from consumers, public health officials, and activists about the health concerns of tobacco consumption (Reynolds Tobacco 1979). In the mid-1980s, many governments started controlling the tobacco industry (Kagan & Vogel 1993) but Japan tobacco industry retained its industry in the hand's ministry of finance and an industry dominated by the government advisory council.

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