1.
In the 1980s Japan was viewed as one of the world’s most dynamic
economies. Today it is viewed as one of its most stagnant. Why has the
Japanese economy stagnated?
Japan was widely viewed as an economic super-power. People in over the
world have admired Japanese’s efforts and personalities to improve their country
after the war occurred. They have succeeded in improving the country in many
areas after three decades of robust economic growth; Japan becomes the world’s
second-largest economy. However, Japan’s economy is seen as an economic
malaise for some of reasons: One of the main factors leading to this situation is the
economic system of Japanese. Due to the issue of the Yen increased the US dollar,
the price of imported goods decreased, the amount of surplus rose, Japanese
economic growth went mainly based on exporting, and Japan has experienced a
period of economic bubbles as speculation. The collapse of the bubble economy
and the globalization wave made Japan economy entered a period of prolonged
stagnation. The sustainability of the Japanese economic system has been put a
question mark. Asset prices are declining due to adverse effects of the bubble
economy. The decline of asset prices has caused the inevitable impact on Japanese
economy
There are two problems caused pressure on the Japanese economy:
The first is the deficit of the state budget. Japan central bank solved this issue
by pumping more money into the economy. Until 1992 Government finance was
still surplus, but then deficit was increasing. Tax revenues reduced while the costs
for the economy to revive increased, which caused Japanese financial balance
became worse.
Second financial issue of Japan is bad debt. After the collapse of the bubble
economy, prices of assets such as land, stocks, etc declined rapidly, financial of
many banks became worse, which caused bankruptcy and deflation for the best
part of two decades.
Another reason to explain Japan’s prolonged malaise came from demographic
factors. Birthrates in Japan decreased dramatically, which made Japan became one
of the oldest populations in the world.
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2. What lessons does the history of Japan over the past 20 years hold for other
nations? What can countries do to avoid the kind of deflationary spiral that
has gripped Japan?
I suppose it’s impossible to solve the problem of deflation in a short time. We
need to have a thorough preparation so as not to affect other sectors. First of all,
it’s necessary to identify the cause of deflation. Once understanding the situation,
we may know how to prevent, or minimize the negative effects of deflation.
It can be seen that one of the basic elements caused deflation is tightening
monetary policy too much. Deflation caused by monetary tightening is
accompanied by bad debt and the collapse of the commercial banks as debt-
deflation. It’s necessary to continue tracking movement of deflation and it’s risks.
First of all, using all strengths to stimulate production and increase aggregate
supply. From the experience of China, we should enhance the competitiveness,
reasonable allocation of investment funds, administrative reform (avoiding a
insensitive decision as desisting rice export contracts causing damage to the
economy), improve the efficiency of investment, encouraging the development of
economy, exploiting the advantages of being WTO membership. Besides, being
very cautious and careful with monetary policy in reasonable ways and in
proportion to the economic development situation.
3. What do you think would be required to get the Japanese economy moving
again?
Central Bank of Japan (BOJ) said Japan’s economy is recovering from the average.
The cause of the Japan’s economic recovery is the increasing of production and
exporting while private consumption has stabilized. Besides, the recovery of many
areas is also being improved. BOJ said Japan would continue the monetary policy
easing to achieve the inflation target at 2%.
Japanese Prime Minister Shinzo Abe said: "The backbone of economic policy
is growth strategy. This strategy aims to encourage technological innovation in
all areas and encourage the creation of activities in the private sector, which is
necessary for long-term recovery of Japan's economy.
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4. What are the implications of Japan’s economic stagnation for the benefits,
costs, and risks of doing business in this nation?
While Japan’s domestic economy is not grow, Japanese companies
tended to bring their money to invested at other foreign countries. Besides,
loan demand in Japan is weak; the Japanese investors seek overseas loans.
Thus, with this situation, bringing investment funds into Japan is not
conducive while investors in Japan gave up their market to seek for other
opportunities. Besides, Japan population is aging rapidly also makes
domestic market demand becomes narrow. Hence, the disadvantages in cost,
market diversification, loans were limited, …etc are the factors to consider
when investing in Japan at this time.
5. As an international business, which economy would you rather invest in, that
of Japan or that of India? Explain your answer (Hill 96)
When investing in any other country, we have to be certain about our
understanding of that country, such as: political situation, economy, moral issues,
culture, etc. In addition, we also have to clarify which segments, areas, objects we
want to target while balancing between risk and profits factors. I would like to give
my opinion as a Vietnamese – bases on the relationship between Vietnam and India.
Ms. Smita Pant, the Indian Consul General in Ho Chi Minh City, Vietnam
gives the campaign "Make in India" and they aims to create a friendly investment
environment with transparent procedures and clear-time to investors. Following the
commitment given by the Prime Minister of India, they urge investors to see India as
a huge market, privatization, and investment facilitation.
Vietnam is one of the largest investors in Burma and Vietnam's investment in
Bangladesh is increasing. Both countries are close to the border with the north-east of
India. During the next few years, greater interaction between India and ASEAN
would open up more new opportunities and potential for businesses to invest in India.
Vietnamese investor can invest to India in the fields of agricultural, aquaculture and
seafood processing, food processing, footwear, furniture and wood products as the
staples of Vietnam. Additionally, India has approved a 51% ownership share of
foreign retailers in India. Expected in 2015, the industry of food processing in India
will reach 320 billion US dollars. Hence, as a Vietnamese investor, I should now start
looking for solutions to penetrate this huge market. Besides, most of the investment
projects of Indian investors are the small ones. India is trying to make a few big
investment projects in sectors, such as: electricity, automobiles, and technology.
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