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JAPAN Team #12 Colton, Brett, Ryan, Lee 日本. OUTLINE Background Current Economic Situation...
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Transcript of JAPAN Team #12 Colton, Brett, Ryan, Lee 日本. OUTLINE Background Current Economic Situation...
OUTLINEOUTLINE
• Background
• Current Economic Situation
• International Aspects
• Special Problems
• The Future…
JAPAN – BackgroundJAPAN – 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
JAPAN – BackgroundJAPAN – 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!
Modern HistoryModern History
• Inflation, unemployment, supply shortages…
• Post WWII – American contribution• SCAP
– Focused on economic development
• Korean War
• Admittance to GATT
• MITI
History of Japan – History of Japan – Finance SectorFinance Sector
• Decentralization of Zaibatsu
• Establishment of Keiretsu
Keiretsu (Keiretsu (系列系列 ))
• Japanese Economic Miracle
• Heavy Industry, High Growth
• Over-loaning
JAPANJAPAN
Economic SituationEconomic Situation
OUTLINEOUTLINE
• Japanese Economy Facts
• Recent Economic History
• Causes of the Crisis
• Economic Recovery
• Current State and System
Economy - Quick FactsEconomy - 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)
IndustriesIndustries
• Manufacturing, construction, distribution, real estate, and communication are Japan's major industries today.
• Agriculture makes up only about 2% of the GNP.
Competitive EdgeCompetitive 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
1970’s1970’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.
1980’s1980’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).
1980’s1980’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.
Cooling DownCooling 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.
Economic SlumpEconomic Slump
• Real estate prices plummeted
• Japan was mired in a bear market for 14 years.
Banking CrisisBanking 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.
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.
HasHas it worked?it 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.
Has it Worked?Has it Worked?• The Nikkei has shown promising growth since
2003 and all indications are that this growth is expected to continue.
Member OrganizationsMember Organizations
• WTO• Member since 1995.
• OECD• Organization for economic cooperation &
development
• JETRO• Japan External Trade Organization
Interaction with United Interaction with United StatesStates
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.
Investing in JapanInvesting 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
ExportsExports
• 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)
ImportsImports
• 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)
Foreign Trade PoliciesForeign Trade Policies
• Interaction with USA & China– Shift to more exports to China.
Key ChallengesKey Challenges
• Aging Population• Declining population growth post-2006
• Scarcity of resources• Focus naturally must be on ‘labor-intensive’
production
Key ChallengesKey Challenges
• Huge government debt• 170% of GDP
• Solution?
The Future - SolutionsThe Future - Solutions
• Sustain current economic performance
– Be led by domestic demand
– Focus on R&D framework
– Strengthen integration to global economy
The Future - SolutionsThe 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
The Future - SolutionsThe 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)