Transcript Japan 2 - BYU Marriott School

JAPAN
日本
Team #12
Colton, Brett, Ryan, Lee
OUTLINE
• Background
• Current Economic Situation
• International Aspects
• Special Problems
• The Future…
JAPAN – Background
• Land mass comparable to
California
• 62nd largest nation by land area
• 10th largest by population.
• 127,463,611 total population
• (July 2006 est.)
• Strategic Geographic
Location
JAPAN – Background
• Limited natural resources
• Fish – only real major available natural resource
• Government structure:
• Constitutional monarchy with a parliamentary government
• Shower before entering baths in a bathhouse!
Modern History
• Inflation, unemployment, supply
shortages…
• Post WWII – American contribution
• SCAP
– Focused on economic development
• Korean War
• Admittance to GATT
• MITI
History of Japan – Finance
Sector
• Decentralization of
Zaibatsu
• Establishment of
Keiretsu
Keiretsu (系列)
• Japanese Economic
Miracle
• Heavy Industry, High
Growth
• Over-loaning
JAPAN
Economic Situation
OUTLINE
• Japanese Economy Facts
• Recent Economic History
• Causes of the Crisis
• Economic Recovery
• Current State and System
Economy - Quick Facts
• World’s 2nd largest economy
• Only the US has a higher GDP
• GDP (purchasing power parity):
– $4.018 trillion (2005 est.)
• GDP - real growth rate:
– 2.7% (2005 est.)
• GDP - per capita (PPP):
– $31,500 (2005 est.)
• Unemployment rate:
– 4.4% (2005 est.)
• Currency = Yen
• Exchange rates:
– yen per US dollar - 110.22 (2005),
108.19 (2004), 115.93 (2003), 125.39
(2002), 121.53 (2001)
Industries
• Manufacturing,
construction,
distribution, real
estate, and
communication are
Japan's major
industries today.
• Agriculture makes up
only about 2% of the
GNP.
Competitive Edge
• Japan gained its competitive edge by
copying and improving Western products
and selling them for much cheaper.
• Their philosophy was one of cooperation,
where all facets of business and
government worked hand in hand.
• Keiretsu
• Government-led development
1970’s
• Oil crisis and inflation crippled the global economy.
• Japanese car makers, such as Honda, quickly mobilized
to produce inexpensive, fuel efficient cars that crippled
the low-tech, gas-guzzling American Cars.
• Japan also assembled cars with robots, making human
error almost nonexistent.
• Throughout this boom, the Nikkei stock average soared.
1980’s
• Japan added electronics to its list of specialties.
• Keiretsu corporations (e.g. Mitsubishi, Hitachi,
and Sony) copied and produced quality
electronics hardware needed by the growing
computer industry.
• Japan topped American companies because of
its ability to compete on price (due to robots and
cheap labor).
1980’s
• World’s largest creditor
• Highest GDP per capita in the world
• Seen as Utopia
• The economy and stock market were
booming and real estate prices soared.
Cooling Down
• Japan realized that its economy was
inflated and raised interest rates to cool
the growth.
• Within months the Nikkei stock index
(which at its height stood at 40,000 points)
crashed by over 30,000 points.
• The Nikkei could crash this far because its
value was inflated on false hopes and
hype, not solid financials.
Economic Slump
• Real estate prices
plummeted
• Japan was mired in a
bear market for 14
years.
Banking Crisis
• As asset prices fell, firms were unable to
pay their loans, and the Japanese banking
system was crippled by bad debts.
• This resulted in consumer pessimism, and
the inability of banks to lend money,
bringing the economy to a standstill.
Steps to Recovery
• In 1999, the Japanese government poured
money into the banking system, effectively
lowering interest rates to 0%, where it has
remained since.
Has it worked?
• Capital Investment has increased again,
sending the Japanese economic growth rate
to 3.1% in 2006.
• Economic growth last year was 2.7 %, up from
2.3 % in 2004 and 1.8 % in 2003.
Has it Worked?
• The Nikkei has shown promising growth since
2003 and all indications are that this growth is
expected to continue.
JAPAN
International Aspects
Member Organizations
• WTO
• Member since 1995.
• OECD
• Organization for economic cooperation &
development
• JETRO
• Japan External Trade Organization
Interaction with United States
Many similarities between United States and Japan:
•
Democratic societies
•
high literacy rates
•
freedom of expression
•
multiparty political systems
•
highly developed free-market industrial economies
•
favor an open and active international trading system.
Investing in Japan
Investing in Japan
New laws encourage foreign companies to move into Japan:
• Office set-up assistance
• Office rent assistance
Six growth areas:
•
•
•
•
•
•
Health and longevity
Environment and energy
Life quality
Biotechnology
Nanotechnology
IT
Exports
• Exports: Japan's main export goods are cars,
electronic devices and computers.
• Most important single trade partner is the USA
– Exports - partners:
US 22.9%, China 13.4%, South Korea 7.8%,
Taiwan 7.3%, Hong Kong 6.1% (2005)
Imports
• Japan has a large surplus in its export/import balance.
• Current account balance:
$165.6 billion (2005 est.)
• The most important import goods are raw materials
such as oil, foodstuffs, and wood.
– Imports - partners:
China 21%, US 12.7%, Saudi Arabia 5.5%, UAE 4.9%,
Australia 4.7%, South Korea 4.7%, Indonesia 4% (2005)
Foreign Trade Policies
• Interaction with USA & China
– Shift to more exports to China.
JAPAN
Special Considerations
Key Challenges
• Aging Population
• Declining population growth post-2006
• Scarcity of resources
• Focus naturally must be on ‘labor-intensive’
production
Key Challenges
• Huge government debt
• 170% of GDP
• Solution?
JAPAN
The Future
The Future - Solutions
• Sustain current
economic performance
– Be led by domestic
demand
– Focus on R&D
framework
– Strengthen integration
to global economy
The Future - Solutions
• Ensure an end to deflation
• Keep price stability in check
» 0 – 2% inflation range
• Restructuring of major & regional banks
• Scale back role of public institutions
» Japan Post - privatize
• Fiscal Consolidation
• Reduction in spending difficult (aging
population)
» Increase income and consumption
taxes
The Future - Solutions
• Innovation system upgrade
• Slight reform of LT outlook
» Increases capacity for global integration
• Globalization focus
• It worked before, it can again!
» FDI, international labor movement (↑ out, ↓ barriers in)
» Relaxed regulations (copy China)
Questions?
Comments?