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JAPAN

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  1. JAPAN 日本 Team #12 Colton, Brett, Ryan, Lee

  2. OUTLINE • Background • Current Economic Situation • International Aspects • Special Problems • The Future…

  3. JAPAN – Background • Land mass comparable to California • 62nd largest nation by land area • 10th largest by population. • 127,463,611 total population • (July 2006 est.) • Strategic Geographic Location

  4. JAPAN – Background • Limited natural resources • Fish – only real major available natural resource • Government structure: • Constitutional monarchy with a parliamentary government • Shower before entering baths in a bathhouse!

  5. Modern History • Inflation, unemployment, supply shortages… • Post WWII – American contribution • SCAP • Focused on economic development • Korean War • Admittance to GATT • MITI

  6. History of Japan – Finance Sector • Decentralization of Zaibatsu • Establishment of Keiretsu

  7. Keiretsu (系列) • Japanese Economic Miracle • Heavy Industry, High Growth • Over-loaning

  8. JAPANEconomic Situation

  9. OUTLINE • Japanese Economy Facts • Recent Economic History • Causes of the Crisis • Economic Recovery • Current State and System

  10. Economy - Quick Facts • World’s 2nd largest economy • Only the US has a higher GDP • GDP (purchasing power parity): • $4.018 trillion (2005 est.) • GDP - real growth rate: • 2.7% (2005 est.) • GDP - per capita (PPP): • $31,500 (2005 est.) • Unemployment rate: • 4.4% (2005 est.) • Currency = Yen • Exchange rates: • yen per US dollar - 110.22 (2005), 108.19 (2004), 115.93 (2003), 125.39 (2002), 121.53 (2001)

  11. Industries • Manufacturing, construction, distribution, real estate, and communication are Japan's major industries today. • Agriculture makes up only about 2% of the GNP.

  12. Competitive Edge • Japan gained its competitive edge by copying and improving Western products and selling them for much cheaper. • Their philosophy was one of cooperation, where all facets of business and government worked hand in hand. • Keiretsu • Government-led development

  13. 1970’s • Oil crisis and inflation crippled the global economy. • Japanese car makers, such as Honda, quickly mobilized to produce inexpensive, fuel efficient cars that crippled the low-tech, gas-guzzling American Cars. • Japan also assembled cars with robots, making human error almost nonexistent. • Throughout this boom, the Nikkei stock average soared.

  14. 1980’s • Japan added electronics to its list of specialties. • Keiretsu corporations (e.g. Mitsubishi, Hitachi, and Sony) copied and produced quality electronics hardware needed by the growing computer industry. • Japan topped American companies because of its ability to compete on price (due to robots and cheap labor).

  15. 1980’s • World’s largest creditor • Highest GDP per capita in the world • Seen as Utopia • The economy and stock market were booming and real estate prices soared.

  16. Cooling Down • Japan realized that its economy was inflated and raised interest rates to cool the growth. • Within months the Nikkei stock index (which at its height stood at 40,000 points) crashed by over 30,000 points. • The Nikkei could crash this far because its value was inflated on false hopes and hype, not solid financials.

  17. Economic Slump • Real estate prices plummeted • Japan was mired in a bear market for 14 years.

  18. Banking Crisis • As asset prices fell, firms were unable to pay their loans, and the Japanese banking system was crippled by bad debts. • This resulted in consumer pessimism, and the inability of banks to lend money, bringing the economy to a standstill.

  19. Steps to Recovery • In 1999, the Japanese government poured money into the banking system, effectively lowering interest rates to 0%, where it has remained since.

  20. Hasit worked? • Capital Investment has increased again, sending the Japanese economic growth rate to 3.1% in 2006. • Economic growth last year was 2.7 %, up from 2.3 % in 2004 and 1.8 % in 2003.

  21. Has it Worked? • The Nikkei has shown promising growth since 2003 and all indications are that this growth is expected to continue.

  22. JAPANInternational Aspects

  23. Member Organizations • WTO • Member since 1995. • OECD • Organization for economic cooperation & development • JETRO • Japan External Trade Organization

  24. Interaction with United States Many similarities between United States and Japan: • Democratic societies • high literacy rates • freedom of expression • multiparty political systems • highly developed free-market industrial economies • favor an open and active international trading system.

  25. Investing in Japan

  26. Investing in Japan New laws encourage foreign companies to move into Japan: • Office set-up assistance • Office rent assistance Six growth areas: • Health and longevity • Environment and energy • Life quality • Biotechnology • Nanotechnology • IT

  27. Exports • Exports: Japan's main export goods are cars, electronic devices and computers. • Most important single trade partner is the USA • Exports - partners:US 22.9%, China 13.4%, South Korea 7.8%, Taiwan 7.3%, Hong Kong 6.1% (2005)

  28. Imports • Japan has a large surplus in its export/import balance. • Current account balance:$165.6 billion (2005 est.) • The most important import goods are raw materials such as oil, foodstuffs, and wood. • Imports - partners:China 21%, US 12.7%, Saudi Arabia 5.5%, UAE 4.9%, Australia 4.7%, South Korea 4.7%, Indonesia 4% (2005)

  29. Foreign Trade Policies • Interaction with USA & China • Shift to more exports to China.

  30. JAPAN Special Considerations

  31. Aging Population Declining population growth post-2006 Scarcity of resources Focus naturally must be on ‘labor-intensive’ production Key Challenges

  32. Key Challenges • Huge government debt • 170% of GDP • Solution?

  33. JAPAN The Future

  34. The Future - Solutions • Sustain current economic performance • Be led by domestic demand • Focus on R&D framework • Strengthen integration to global economy

  35. The Future - Solutions • Ensure an end to deflation • Keep price stability in check • 0 – 2% inflation range • Restructuring of major & regional banks • Scale back role of public institutions • Japan Post - privatize • Fiscal Consolidation • Reduction in spending difficult (aging population) • Increase income and consumption taxes

  36. The Future - Solutions • Innovation system upgrade • Slight reform of LT outlook • Increases capacity for global integration • Globalization focus • It worked before, it can again! • FDI, international labor movement (↑ out, ↓ barriers in) • Relaxed regulations (copy China)

  37. Questions? Comments?