Japan, a relatively small nation in size, located in Eastern Asia between the North Pacific Ocean and the Sea of Japan boasts a population of about 127,368,088 people; 10th most populated nation. It is quite hard to imagine how a country about the size of the state of California could have been positioned and was predicted to become the largest, most powerful economy in the world. Japan’s economy, in the years following World War II can be described as nothing short of a miracle. For three decades, the real GDP of the country grew at an unperceived rate: a 10% average in the 1960’s, a 5% average in the 1970’s, and a 4% average in the 1980’s (CIA World fact book, 2012). This tremendous success was due to a strong work-ethic, cooperation in the government industry, efficient and innovative high technology sector, and a comparatively small defense allocation (1 % of GDP) (CIA World Fact book, 2012). In the 1990’s, however, growth slowed down to 1.7 % which was due largely in part to inefficient investment. In 2007, Japan’s 69 year economic expansion came to a screeching halt; as a matter of fact, they entered an economic recession as of 2008. The global demand for Japanese exports decreased significantly; as a result, the recession worsened and has brought rise to a new challenge: deflation. In March 2011, Japan's strongest-ever earthquake, and an accompanying tsunami, devastated the northeast part of Honshu island, killing thousands and damaging several nuclear power plants. The catastrophe hobbled the country's economy and its energy infrastructure, and tested e country’s ability to deal with crippling natural disasters. As if matters could not get any worse, Japan’s massive government debt which totals over 200% of the total GDP; in addition to the aging population, pose two additional long-run problems for the country itself and foreign investors alike. Despite the past decade of economic downturn in Japan, the country remains an important economic center for business and investment. Measured on a purchasing power parity basis adjusted for price differences, Japan is still the 3rd largest economy in the world today (CIA World fact book, 2012). As I am an International business major, I chose to do a research paper on investing business in Japan, looking at the pros and cons from a Canadian investors perspective. This paper will look to examine Japan’s market and wealth, major industries and multinationals, infrastructure, social and political stability, and finally, bank system and exchange rates, in relevance to bringing about the benefits or risks associated with Canadian investors considering business investment in Japan. Japan’s Market and Wealth
Of the thousands of different islands that make up Japan, 4 major regions make up the majority of the land mass. Contained in those 4 islands is the 3rd largest free market economy in the world, recently overtaken by the emerging economic powerhouse, China, (The Economist, 2011). After WWII, Japan was able to develop an economy that became highly efficient and competitive in terms international business. This was made possible by leading industrial leadership and technicians, a well-educated work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade. From the 60’s through to the 80’s, Japan attained one of the highest economic growth rates in the world. However when the 90’s hit, Japan’s growth slowed down immensely to an average of 1 % compared to 4 % in the 80’s (Economy watch). Entering the year 2008, Japan experienced its first economic recession in 6 years – reporting a – 0.7 % real GDP growth. Furthermore, forecasts by the EIU (Economist Intelligent Unit, 2009) predict the overall real GDP growth to further decrease by - 6.2% in fiscal year 2009.
Despite a return to positive economic growth in the second quarter of 2009 through...