During The 1980s, Japan Had One Of The Most Profitable And Efficient Essay

During the 1980’s, Japan had one of the most profitable and efficient economies in the world. But a recent recession has forced Japan to make changes and pushed them back, out of the realm of being an economic superpower. This leaves just one question; when analyzing Japan’s strengths and weakness, is it likely for them to return to the economic status they enjoyed during the 1980’s? The answer is no. Because of Japanese false illusions, increasing national debt and deflation, combined with other factors, it is unlikely that Japan will be able to make a full recovery.

When analyzing something as complex as a country suffering from a national recession, it is important to note their various strengths. During the 1980’s, Japan exploded onto the global economic scene. The Japanese established themselves among the ranks of the United States and various European powers. One of the greatest strengths enjoyed by Japan is the absence of any military institution. After World War II, the United States, in congruence with the other allied powers, declared that Japan was no longer to have a national military. Just think about that, military expenses account for a great portion of any countries national budget. Japan, now without military, had large amounts of money freed up by this policy (Nishiyama, 2). They no longer had to endure the expenses of maintaining any standing military, nor did they have to invest money in keeping pace with military technological advancements. Instead, Japan was promised military assistance by the United States, if any situation were to arise.

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With more money available to the Japanese government, they were able to distribute more to other sectors of the country. This was an extreme boost for the economic situation of Japan and their citizens (Nishiyama, 2). But as time moved on, the United States slowly moved to lessen it’s role in the protection of Japan. They allowed Japan to form what is called Self Defense Forces, and gradually began to transfer the responsibility of national security back to the Japanese (Alexander, 3). The concept of Self Defense Forces is pretty evident. It means that Japan is know capable of defending themselves against attack, but cannot make an attack of their own. This has placed a burden on Japan, one that they have not had since the conclusion of World War II. This can be compared to an individual that has worked for the last 50 or so years for the same wages, and then suddenly he is informed of a large expense that he would have to endure, using only his previous wages. This is what Japan had to deal with, and is still trying to deal with today.

Probably the most important strength of the Japanese economy is their relation both economically and politically with the United States. The United States, for one thing, has been one of the most prominent importers of Japanese products (Motohiro, 1). The United States rely on a number of Japanese goods, ranging from automobiles to electronics. Japan, being the small country that it is, needs to export a majority of its domestically produced goods. The United States satisfies this need through their dependence on Japanese goods and by imposing minimal tariffs and taxes on Japanese products (Motohiro, 1). The United States has been a stable and reliable market for Japanese goods.

Before Japan feel into deep recession in the early 1990’s, Japan was often relied upon to keep the global economy intact (Yomiuri Shimbun, 1). But in recent years, Japan has not been able to contribute at the same levels as it had in prior years. Presently, the United States has shouldered the weight of the global economy, providing relief to Japan during their own personal downward turn (Yomiuri Shimbun, 1). What is meant by relief is the United States contributing more to the Global economy, so that Japan doesn’t have to maintain its previous contributions. The United States realized that if Japan had continued its immense role in the global economy, it would have eventually meant the overall demise of Japan’s national economy (Yomiuri Shimbun, 1). With the United States taking on this extra burden, they are allowing Japan to attempt to rebuild their own economic system, without any added global pressures.

The United States has also played a direct role in improving Japan’s economy. It is widely known that Japan is lacking in the area of foreign investment (Rowely, 3). They have always relied on domestic investors to support them. Since this is creating a problem now in Japan, being that the economy is down as well as domestic investment, the United States has tried to step up and cure this looming problem. In recent months, the United States has unveiled plans to deregulate the Japanese economy, thus opening it up to foreign investment (Rowely, 3). Among the sectors included in this plan are: telecommunications, pharmaceuticals, medical equipment, energy and construction, all of which Japan has relied on domestic investment to fund in the past (Rowely, 3).

The United States is proposing to do this by breaking down the trade barriers that exist in Japan. It is widely known that the United States has provided Japanese imports with a stable market, while the Japanese have not returned the favor. American products are expensive and rare in Japan, and it seems that this is the way that the Japanese government wants it. Even now when foreign investment seems to be beneficial to the Japanese, they are against the policy initiatives of the United States. Japanese officials maintain that good economic relations between Japan and the United States are essential to both countries, yet they continually challenge the policy initiatives provided by the United States. It is obvious that American-Japanese relations are important to both countries, in that Japan is in need of economic assistance, and the United States needs future assistance in the global economy. But the Japanese continue to resist foreign influence and investment.

Along with recent policy initiatives, Japanese officials have instituted their own domestic policies. Former Prime Minister Yosano developed a number of policy ideas that possessed great potential for the revitalization of the Japanese economy. First he spoke about a 60 trillion yen program to pay off bad loans and restore the strength of Japanese financial institution (Daily Yomiuri, 1). Next Yosano spoke about initiatives that he had on addressing the so call “Credit Crunch” of Japanese businesses (Daily Yomiuri, 1). And lastly he showed his intentions of injecting over 27 trillion yen into the economy to restore and stimulate consumer confidence and demand (Daily Yomiuri, 1). So as you can see, Japan is making efforts to address their social-economic problems from within as well.

It may seem that Japan has the numerous strengths; including minimal military responciblity, strong markets for exports in the United States and United States assistance in both the global economy and domestic economies. These strengths may lead one to believe that the eventual restoration of the Japanese economy is inevitable. But this is not the case. The weakness of the Japanese economy makes it almost impossible for them to reach the economic heights that they once enjoyed. One of these weaknesses is the recent deflation that Japan is experiencing. Deflation is an overall decrease in the value of money, goods and services inside a particular country (Matthews, 26). This deflation effects both the consumption of the Japanese people, and the amount of confidence that the Japanese people have in the economy. When people witness the value of their currency decreasing, it is only natural that they express deep concern. This means that they have to work just as hard to earn less (Matthews, 26). When people feel that they are losing money, they cut back on the amount that they spend, thus dragging down consumption (Matthews, 26). Even though deflation has started to slow now in Japan, they have already reached a point that is difficult to completely rebound from. It is possible for Japan to make a moderate recovery, but to restore themselves as an economic superpower is highly unlikely.

Another problem facing the Japanese people is the national debt. By the beginning of the year 2000, Japan estimated their debt around 117.6% of the Gross Domestic Product (Tamamoto, 25). This is an astounding number, in that it is the highest debt ratio of any of the modern industrialized countries. Japan is by far the deepest in debt, and that includes the United States and Great Britain, two of the top foreign and domestic money dispensing countries in the world. To make matters worse, Japan’s Finance Ministry projects an increase in the debt to 132.9% by the end of the year 2000 (Tamamoto, 25). With debt so high at the present time in Japan, and matters not looking any better in the future, Japan’s economic restoration will likely be halted.

The Japanese financial and banking sectors are also dragging down the economy. Banks throughout Japan are ready to fold, due to the decrease in domestic borrowing and consumption (BNP Economic Newsletter, 5). What the Japanese have to do is use public funds to reestablish the banking system. If not, the banks will go under, and the economic condition will worsen even further (BNP Economic Newsletter, 5). Japanese officials have addressed this problem, but there has not been anyone that stepped up and took action. This is another problem in Japan.

Various political and economic officials have called out for policies and funding, but none have actually turned their proposals into action. The words of these people are “empty,” and the Japanese public can not rely or even consider what they hear, because they know that nothing will ever get done (Tamamoto, 25). It seems that Japanese officials are scared to take action. The issue concerning the economy in Japan is very touchy, and officials do not want to get the blame if their polices do not work.

It has been nearly nine years since the Japanese economy collapsed, leaving Japan in an economic recession, comparable to that of the Great Depression experienced by the United States in the 1930’s. But the Japanese people still cannot let go of the notion that perceives Japan as an economic superpower (Shibata, 1). They are simply obsessed with this thought, which many seem to be grasping in order to remember the economic success they had nearly a decade ago. They are unable to forget figures like the second largest gross national product, highest per capita income and the world’s largest foreign reserve, all of which Japan earned during the 1980’s (Shibata, 1). But this reliance and reflection on the past is hurting Japan more than anything else. This prohibits Japan from considering any reform. They are left with the thought that they will once again reach the pinnacle of the global economy, while at the same time neglecting change that may be beneficial. It is as though Japan is living through the illusion of an economic superpower, one that the Japanese public cherishes and lives according to. What the Japanese people need is a reality check if they are to salvage what is left of the economy, and begin to make gradual changes and improvements.

Japan is obviously facing numerous economic problems. Many people will be quick to say that Japan will likely return to a position of economic superiority, but this is false. Although they have the support of the United States, combined with tremendous profits from exporting domestic goods to foreign countries, Japan has far too many weaknesses in their strategy and self-perception. Until Japan is able to realize the position they are in and make quality reforms, they will continue to spiral downwards deeper into economic despair.

Works Cited
Alexander, Arthur J. “Recent Indicators Suggest End of
Japanese Economy’s Decline.” JEI Report. 7 September
1999: 1-3.

“The Japanese Economy Convalesces.” BNP Economic
Newsletter. 29 February 2000: 5.

“Change is a Matter of Urgency.” The Daily Yomiuri.

7 March 2000: 1-2.

Matthews, Jane. “Japan.” Barclays Bank International
Financial Outlook. 1 May 1999: 26.

Miller, Rich. “Prospects Look Good For Trade Deal Opening
Doors to Japan.” USA Today. 28 April 1999: 01B.

Motohiro, Kondo. “Watching America Watch Japan.” Japan
Echo. 1 April 2000: 52.

Nishiyama, Hidehiko. “Japan MITI Minister Speaks of
Economic Future, US Relations.” Asia Pulse. 13
January 1999: 1-2.

Rowely, Anthony. “Positive Flip Side Seen to Japanese
Economy.” Business Times. 13 March 2000: 3.

Shibata, Yasuhiko. “Sayonara’ to Days As Economic
Superpower.” The Daily Yomiuri. 29 December 1999:

Tamamoto, Masaru. “The Privilege of Choosing: The Fallout
From Japan’s Economic Crisis.” World Policy Journal.

1 October 1999: 25.

“U.S. Can’t Shoulder Burden Alone.” The Yomiuri Shimbun.

28 March 1999: 1-2.


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