The East Asian economic core area: Japan

1. The EastAsian economic core area: Japan dr. Jeney László Senior lecturer jeney@elte.hu Economic Geography I. International Business bachelor study programme (BA) Autumn term 2015/2016. CUB Department of Economic Geography and Futures Studies

2. The area of the East Asia and Far East Far East (Wider East Asia) Northeast Asia (Siberia, Russian Far East) East Asia (Japan, Korea, China, Mongolia) Southeast Asia (Mainland SEA, Insular SEA) Large World region: East Asia Territory: 12 mn km2 (8% of the World) Population: 1,6 bn (23% of the World) WR1. 2

3. East Asian miracle Late 20th century: reemergence of East Asia Political, economic and cultural impacts Refocuses the global economic growth and political power on the Pacific Region Interactas to the globalization trends and 3

4. The Japanesewaytotheeconomicmiracle

5. Japan: more than 2000 years old historical past • Till the early 18th cent. XVII.: empires (tenno) • Cultural and trading relations to other East Asian areas (mainly China, but Korea as well) • Capital: Kyoto • Power of army (leader shogun)  totally isolation (dynasty of Tokugawa shogun) • Centralized, on feudal basis • Capital: Edo (today: Tokyo) • Late 18th century: unsuccessful economic contacts by Europeans • Mid-19th century: successful contacts by the USA • Followed by the English, Dutch, French, Russian traders • 1868–1912: restoration of the power of empire (Mutsuhito tenno) • Meiji period

6. Reforms of education • Till that time the majority of society was analphabetic • Introduction of compulsory elementary education (earlier than more developed countries) • 1880s: 6–13 years old boys 54%, girls 19% attended school • 1900: 95% alphabet • More skilled manpower  adoption of Western technologies

7. Meiji reforms: civil change, rapid catch-up • Instead of feudal system  former peasantry  cheap manpower for the modernizing economy • First manufactures • Initially capital concentration in the richest feudal families  monopole organisations • Important role of state • Stabilization of the capitalist order • Central Bank: development of heavy industry, transport • Cancellation of the feudal social hierarchy • New administrative system (46 prefectures) • Permission of free movement of citizens • Cancellation of inner tolls  single market of the country

8. The East Asian economic Miracle • The only one world region in the focuses of the world economy starting not on the basis of the Western civilization • Maintenance of its own culture and traditions • Japan: the way to the economic power • Under a historically uneven short period • An outstanding rapidly growing economy for decades • Korea, Taiwan and Southeast Asia: follow the Japanese sample • China: political-military, cultural, and increasingly economic power

9. The Japanese economy changed massively after WWII Post-war period: present government, economy and constitution were put in place 1960–1990: contribution to total world GDP grew from 3.5 to 14 % 1960–2002: Primary sector declined from 33 to 1 percent Service sector rose from 38 to 68 percent From 1990s: Japanese economy slowed China’s GDP 1.5 times higher But per capita GDP remained much higher in Japan ($35.000) than in China ($6.000) 9

10. After reconstruction Reconstruction WWII: Japanese industry destroyed After war: US poured money to rebuild the industries and infrastructure Cold War, Communist takeover in China, Korean war  US became opened to Japanese products Advantageous environment for Japan Cheap raw material on world markets Transportation innovation: building large oil tankers and carriers (oil from SW-Asia, iron ore from Australia) Own low-cost, young labour force 1960s: 10 % economic growth Firms indorsed profits back into new developments Better wages  Japanese consumers could buy a range of home-made products 10

11. 1970s: increasing costs and „just in time” 1970s: increased oil prices Japan depended on imported oil for 70 % energy needs reduced costs of hydroelectricity and nuclear power Older industries (steelmaking, shipbuilding, petrochemicals, cement making) suffered from overcapacity on world markets Factory closures  social problems, unemployment (e.g. Osaka) Investments to light industries (producing cameras, household appliances) Firstly copied others’ technologies and designs, later initiator By 2000 half of the world’s industrial robots (4x installed than in the US) „Just-in-time” deliveries cut warehousing costs Toyota: employed more human skills instead of indiscriminate use of robotics (  too expensive) 1980s huge export income  caused the yen to double in value compared to other currencies Japanese export became more costly for other countries Imports became cheaper Turned country of producers to one of consumers 11

12. From 1980s: global investments Large yen trading surpluses  Japanese corporations invested more Firstly: bought out foreign mineral suppliers Later: established Japanese factories abroad Answer to quotas on import of home-made cars First major investments in US and GB, from late 1980s then in Southeast Asia  economic growth of NIC countries Mid-1990s investments in cheap-labour assembly-line factories by moving design and research facilities to SEA Early 2000s: increasing investments in China (mainly to Dalian) – huge trade deficit to China 12

13. Renewed economic challenges Early 2000s: J faced a need to change Investments resulted huge debts  banking system under pressure Western countries imitated Japanese production processes (Toyotism) Japan looked more closely at Western ways in relation to financial control Trade surplus  rapid growth of financial and business services 1986: Tokyo became the second financial centre  further population increases Increase in service occupation  widened range of employment Diversified economy  not so dependent on fluctuations of world markets 13