Test 2 Japan

Question 1

What are the descriptive names given to Japan and why?

Answer 1

Welfare capitalism because they provide lifetime employment

-japan inc because they run as a tight corporation

Question 2

what are the positives and negatives of Keiretsu organization

Answer 2

Advantages:
1. Low information cost - technology sharing, r&d sharing
2. low transaction cost - share legal, marketing insurance, distribution, advertising, service
3. Low supply costs- electronics, steel, computer chips, car parts
Disadvantages:
1. Reduced import competition- intra-industry trade was not good to pressure introduction of new technologies
2. Lack of foreign equity- cross ownership and no stockholder pressure, could make choices secondary to profits
3. reduced price competition- insider trading, not the cheapest supplier always wins the contract

Question 3

what tools and institutions did the japanese govt use to control and direct the economy

Answer 3

Advisory councils

Zaikai white papers to control private sectors

Question 4

characterize the positives and negatives of the labor relations in japan: unions, lifetime employment, labor protection laws

Answer 4

Unions:
Positives: cooperate and accept seniority wage system and permanent employment
Negatives: hard to negotiate

Lifetime employment:
Positives: job security, guaranteed seniority based promotions and sponsored loans
Negatives: have to accept wage cuts to avoid layoffs, companies reluctant to hire so it’s hard to find a job and you may work part time

Labor Protection laws:
Positives: lifetime employment guarantee, you know you’ll get paid more when you get older
Negatives: hard to advance, hurts businesses

Question 5

why fujitsu and panasonic suffered because they could not fire workers

Answer 5

Fujitsu: laid off 5000 jobs and had to pay 54.2 billion yen to government, very hard to fire employees

Panasonic: plans to spend 250 billion yes on restructuring to curb losses from tvs, electronic parts, and spend 100 billion yen in voluntary retirement packages if they follow through on laying off 10,000 employees.

Question 6

what were the main causes of the economic slowdown of japan since 1990

Answer 6

1. poor capital allocation- return to capital was not important, not all product lines were successful/ Keiretsu banks were overloaded with bad loans
2. lack of competition- protectionist in services, retail and agriculture led to low productivity/ limited sales incentives/ large retail store law- need approval for walmart/ vertical foreclosure- only carry one line of products
3. labor problems: seniority based promotions
4. overregulation- small business protection/ dual economy/ white elephants- wasteful government sponsored projects in infrastructure
5. debt- too many mistakes and non performing loans, large pension savings, became too dependent on export
6. deflation- low interest rates to pump up business investments, high taxes, high savings high prives

Question 7

why is jasper knoll optimistic about japan? what are the japanese economic assets

Answer 7

1. sweet spot- you make money from your early 40s-55, japanese passing sweet spot now so it will be less expensive to run the economy, cheaper labor
2. many opportunities to turn around burden of old people, develop health care industry more nurses and retirement homes
3. Makes specific parts that no one else can make like parts for airplanes and cell phones
4. japan loans a lot of money to the world, they are owed 4 trillion
5. agriculture- average age is 70, increase farm productivity and japan can run a trade surplus, need a change in rules and regulations.

Question 8

what are the three important problems which needs to be addressed in japan according to jasper knoll

Answer 8

1. Debt- bad loans, current debt ration is 240% of gdp.
2. deflation- due to lack of internal demand japan is facing through their decreasing consumption levels and high investment levels.
3. Demographics- aging and opposition to immigration. less workers in labor force, no social security

Question 9

How labor laws contributed to deflation in Japan

Answer 9

• Deflation persists due to declining wages and the one way to cut costs is cutting wages because you can’t layoff employees
• Have to cut wages due to aging workforce and strict labor regulation, this results in currency deflation

Question 10

How is the PM Abe of Japan reforming the labor economy in Japan?

Answer 10

1. wants to loosen up labor laws because they have lifetime employment
2. wants to rebuild military
3. wants japan to have quantitative ease in buying bonds