The Economy of Japan

Paper Summary:

This paper examines how Japan has the second largest economy in the world with a high Domestic Product (GDP) and a very high standard of living. Japan?s foreign exchange reserves are the largest in the world ($203.22US billion in 1998) and Japan is the world's largest creditor. It analyzes the reasons for the downturn in its economy in the 1990s during which Japan found itself in 1997 in its worst recession since World War II. It examines the several significant structural adjustments that needed be made to the Japanese economy as recommended by economists in order to normalize its economy. It discusses issues such as the need for the banks to clean up bad debts and the steps corporate management had to take to deal with the effect of having to pay the world's highest labor costs, which resulted from the strong yen pushing up Japan's average wages to the highest in the world. It also looks at the effects of globalization on Japanese industry.

From the Paper:

"The Japanese economy faces several challenges in its attempt to normalize its economy. Its history of government intervention is contrary to classical economic free-market theories that would argue the economy should be left unregulated so that it could correct itself. While Japanese government intervention may have been necessary in the post-war period, its artificial schemes may now hinder it progress. For example, Japan must control its costs to compete with global prices. Yet, the Japanese government continues to set the prices of services, in particular the prices of utility services such as the prices of electricity, communications services, and highway tolls. The government determines these prices by adding what is called reasonable profit margins onto costs."

More papers on The Economy of Japan:

• Research Paper # 67845 : "The Future of Japan"
• Book Review # 65198 : "The Rise of Modern Japan"
• Analytical Essay # 146830 : "Quantative Easing and the Impact on the Economy"

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