Name Casimiro, Ma. Angelica A.

Course INBUSIN
Deadline 22 May 2024

Activity 1: Globalization

Instruction: Choose a country, any country of choice. Provide details on how this
country embraced globalization by using the PESTLE (Political, Economic, Social,
Technological, Legal and Environmental) analysis. The analysis can be pros and cons
or a combination of both.

COUNTRY Japan
Political Pros: According to Mulga (2018), Japan was the primary force
driving negotiations for the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), also known
as the TPP-11, after the United States withdrew from the original
Trans-Pacific Partnership a year earlier. Japan has actively
participated in negotiating trade agreements to enhance its
global trade relationships. It is rare for Japan to lead in
multilateral negotiations, but the absence of the United States
from the TPP gave Japan more space to exercise leadership in
securing mega-regional trade deals. Japan took the opportunity
to establish 'rules of the road' in concert with the remaining TPP
partners, rather than being on the receiving end of external
pressure from the United States, as it had been in the original
negotiations. Japan’s chief TPP negotiator, Kazuyoshi
Umemoto, commented that for the first time, Japan was able to
take the lead instead of being on the defensive. Additionally,
Japan has signed a trade deal with the European Union. These
agreements have helped Japan strengthen its economic ties
with other countries and regions.

Cons: Investment returns and payments for intellectual property

are likely to become increasingly important to Japan in the
future. Considering these factors, establishing FTAs with Asian
countries will be extremely significant for improving market
access and local business environments. Conversely, if Japan
delays FTA negotiations and is left behind while FTAs are
formed among Asian economies or between Asian economies
and the United States, Japanese companies will face several
disadvantages.

First, there would be a relative decline in export terms. Second,

Japanese companies would incur additional costs due to the
need to commission production to avoid disadvantageous tariff
rates. Third, investment conditions would deteriorate in relative
 terms.
Economic -Pros: Japan has a strong focus on technological innovation,
which has helped the country stay competitive in the global
market. Japanese companies have been at the forefront of
technological advancements in various sectors, such as
electronics, automotive, and robotics. By investing in research
and development, Japan has maintained its position as a global
technological leader. In 2023, Japan dominated the global
automotive export market, reinforcing its role as a major player
in the industry. The automotive sector, represented by HS code
8703 for motor cars, plays a crucial role in Japan’s economy,
accounting for 13.9% of the manufacturing GDP and 2.9% of the
country's overall GDP. Japan's car export statistics for 2023-24
highlight its strong presence in key export markets and a diverse
range of vehicles being shipped worldwide. With a focus on
exceptional innovation and sustainability, the future of Japan's
car exports appears promising, ensuring continued growth and
success for the nation's automotive industry.

Cons: While globalization brings huge profits for export-oriented

companies in Japan, it also causes significant challenges for
import-oriented companies that heavily rely on foreign energy,
food, and materials. Big companies might be thriving, but most
small and medium-sized enterprises (SMEs) are not. The
biggest predicament facing Japan’s economy is the slump in
consumption, primarily because ordinary workers’ wages have
remained stagnant for the past three decades—an abnormal
situation for an advanced economy.

Although large companies have raised wages in response to the

government’s request, most SMEs are reluctant to do so.
Additionally, due to the Bank of Japan’s continuous financial
deregulation, the Japanese economy has shifted from deflation
to inflation in recent years. Commodity prices are rising sharply,
but ordinary people’s salaries are not keeping pace.
Social -Pros: To adapt to the changing global economy, Japan has
implemented labor market reforms to increase flexibility and
competitiveness. These reforms address issues such as a
shrinking workforce, an aging population, and the need for
skilled labor. By making its labor market more adaptable, Japan
can better respond to global economic challenges.

According to Aoyagi (2015), Japan’s labor market has

traditionally been characterized by the lifetime employment
system, where employers refrain from firing workers, and
workers implicitly commit to staying with their employer until
 retirement. This system facilitated the accumulation of firm-
specific human capital and built trust between employer and
employee, serving the country well during decades of high
growth. The image of the Japanese “salaryman,” who returns
home late after long hours at the office, is legendary. Such
devotion has traditionally been rewarded by employers, who
often feel personally responsible for the welfare of employees
and their families, making them very reluctant to lay off workers.
Even during the global economic crisis of 2009–10, Japan's
unemployment rate was just slightly above 5 percent, compared
to the OECD average of 8 percent.

In contrast to the Philippines, Japan’s employment regulations

ensure that senior citizens are treated fairly and given work
opportunities until they retire. In the Philippines, however, older
employees often find it difficult to secure employment, as
employers are less interested in hiring them.

Cons: The erosion of the lifetime employment system and the

resulting increase in labor market duality are not the only
challenges facing Japan’s labor market. The country is also
experiencing the sharpest labor force decline among advanced
economies due to rapid population aging. Consequently,
policymakers are tasked with implementing reforms aimed at
simultaneously increasing labor supply and productivity.

In this chapter, we argue that these reforms should include

measures to increase the labor participation of women,
foreigners, and older workers, as well as contract reform to
reduce labor-market duality. However, these reforms will
unavoidably take time to design and implement before they can
raise potential economic growth. While we expect the medium-
and long-term impact of these reforms to be reflationary due to
higher growth, some policies might have a deflationary impact in
the short term, depending on the timing of the boost to
aggregate demand versus the reduction in average wages.
Technological -Pros: It is difficult to imagine a country more globalized than
Japan. Japan has showered the world with high-tech exports,
including automobiles, microelectronic products, and gadgets.
Japanese companies have invested globally; for instance,
Toyota even established an automobile plant in France despite
its stringent labor laws.

Japanese companies such as Sony, Panasonic, and Nintendo

have made major contributions to the technology and
entertainment industries worldwide. From the invention of the
 Walkman to the development of the PlayStation, these
companies have consistently pushed the boundaries of
innovation. By influencing and impacting other countries'
interests, Japan has strengthened and unified its culture on a
global scale. Additionally, Japanese tourists are a common sight
around the world, from the Empire State Building to the
Champs-Élysées and the golf courses of Hawaii.

-Cons: The OECD concludes that Japan is perhaps the least

globalized among its 30 member countries. Foreign direct
investment (FDI) has been a key driver of globalization in recent
decades, with multinational companies establishing global
production systems and supply chains. According to the
UNCTAD World Investment Report, global FDI flows reached a
historic peak of $1,800 billion in 2007, prior to the onset of the
financial crisis. However, Japan has largely missed out on the
FDI boom.

In 2004, Japan's stock of FDI amounted to only 2% of its GDP,

the lowest among all OECD countries. Delving deeper into FDI,
mergers and acquisitions (M&As) account for 60% of FDI flows.
Yet, in 2004, Japan accounted for only 2% of the value of global
M&As, while the US represented 22% and the EU 47%. This
indicates that Japan has not fully capitalized on the opportunities
provided by globalization, particularly in terms of attracting and
participating in international investment and corporate
consolidation.
Legal -Pros: The Economic 2+2 was attended by Japan’s Minister for
Foreign Affairs Hayashi Yoshimasa and Minister of Economy,
Trade, and Industry Hagiuda Koichi, along with U.S. Secretary of
State Antony Blinken and Secretary of Commerce Gina
Raimondo. This meeting aimed to build a robust economic order
and ensure sustainable economic growth. Both nations sought
to coordinate progress on advanced technologies to establish an
effective economic framework that supports a free and open
Indo-Pacific.

The Japanese ministers expressed their desire for Japan to

cooperate with the United States' Indo-Pacific Economic
Framework (IPEF) and to collaborate on issues related to
human rights and the digital economy. As the world recovers
from the pandemic, which caused supply chain disruptions, and
the Ukraine crisis, which has threatened global energy and food
security, this economic forum focused on strengthening supply
chain resilience, protecting critical emerging technologies, and
 stabilizing energy supplies.

-Cons: The U.S.–Japan alliance, a critical pillar of regional

stability and a central element of U.S. regional and global
strategy, is currently operating in a dynamically evolving
environment. The regional security situation in Northeast Asia is
at a critical inflection point, with shifting power relationships
among the region's actors. The alliance faces significant
challenges, starting with North Korea, which have major
implications for the alliance itself and for regional stability. How
the alliance responds to these challenges will shape the
evolution of Northeast Asia's security situation for decades to
come.

Additionally, the U.S.–Japan alliance faces the uncertainty

created by China's rapid military modernization, the People’s
Republic of China’s strong assertion of its positions on territorial
issues, its unclear regional aspirations, and the added
dimension of Beijing’s cyberwarfare capabilities.
Environmental -Pros: Japan has recognized the importance of environmental
sustainability in the face of globalization and regionalism. The
country has taken significant steps to promote clean energy
technologies, reduce carbon emissions, and address
environmental challenges such as climate change. By prioritizing
sustainability, Japan aims to contribute to global efforts to
combat climate change and promote a more sustainable future.

According to Matsushita, Japan's Long-Term Strategy sets forth

a vision of achieving a “decarbonized society” as early as
possible in the second half of this century. To enable this, Japan
seeks to realize a “virtuous cycle of environment and growth”
through business-led disruptive innovation. The strategy is
positioned as an investment strategy and emphasizes Japan’s
intention to lead international discussions and create
frameworks and standards in the field of climate change.

Japan has played a significant role in international climate

change negotiations since 1997, when the Kyoto Protocol was
adopted at the 3rd Conference of the Parties of the United
Nations Framework Convention on Climate Change (COP3) in
Kyoto. Recognized for its advanced energy-efficient and
environmentally sound technologies, Japan has contributed to
international cooperation on climate change in various ways.
The country has improved energy efficiency by approximately
40% since the 1970s through policy changes and technological
innovations. In Japan, climate action is not only about policy—
it’s personal.

-Cons: However, Japan's performance up to 2013 was not

satisfactory, particularly after the Great East Japan Earthquake
on March 11, 2011. Since then, the country has increased its
dependence on coal-fired power, leading to a substantial rise in
greenhouse gas emissions.