Retrospect and Prospect of the Japanese Economy

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Retrospect and Prospect ofthe Japanese Economy
by Prof. Kamchai Laismit The International
University of Kagoshima

• At
• National Kaohsiung University of Applied Sciences
• November 2008

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Outline for Discussion

• Success Story in the Past
• Policy Failure in the Near Past
• Uncertainty at the Present
• The Turbulent Future

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1. Success Story in the Past

• The High-Growth Period (1955-1973)
• Key words 4M
• (Man, Material, Money, Method)
• Man abundance of cheap and skillful labour.
  Baby boom ? the generation of Dankai Sedai
  (????).
• Material very active in capital investment and
  import western technology, and realized economy
  of scale.
• Money the Main Bank system, cross-holding of
  shares, 360 yen/dollar.
• Method positive industrial and trade policy,
  relevance of macroeconomic management.

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2. Policy Failure in the Near Past

• The uneven Japan-US Policy Coordination (Japan as
  a client state of the US)
• The US pressure for reducing trade deficit
  toward Japan in the 2nd half of 1980s ? The Plaza
  Accord in 1985 admitted the appreciation of yen
  (Endaka).
• The Endaka(??)Syndrome
• A strong belief that Endaka will cause recession
  spread over government and private sectors. Thus,
  intervention always led to cheap yen policy that
  benefited big export manufacturers.
• The Kleptocracy State Iron Coalition of
  Politician-Bureaucrat-Businessman
• The Lost Decade began when the Japanese bubble
  busted in 1990.

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3. Uncertainty at the Present

• Zero Interest Policy is intended to stimulated
  domestic recovery, but in fact it promoted the
  yen carry trade that dumped the yen more
  cheaper without direct intervention into currency
  market.
• The US Subprime Loan Crisis
• A huge amount of Cheap yen are borrowed for
  speculative investment in derivatives. When,
  subprime mortgages are in crisis, financial
  institutions and stock market collapse ?
  Unwinding of yen carry trade ? Endaka
• The Aged Economy Low birth rate and retirement
  of the Dankai Sedai generation resulted in the
  decline of working population. Thus, losing
  competitive advantage as a productive economy.

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4. The Turbulent Future

• The 2009 Great Depression ?
• 80 years later, it started from the New York
  Stock Exchange market again! The US Subprime Loan
  crisis spreads over the world by contagion. The
  Japanese recession is no exemption, so are other
  economies.
• The Changing Political Regime
• Coincidentally, the year 2009 is expected to be
  a transition point for changing government party.
  If the next government confused using irrelevant
  policy again, then the future should be
  unforeseeable.
• All parties concerned should be aware of the
  changing condition of the Japanese economy.
  Especially, the zero interest rate and cheap yen
  policies should be reviewed most.