Macroeconomic Analysis Japan

Topics: Inflation, Recession, Macroeconomics Pages: 15 (3941 words) Published: February 17, 2011
|Japan: Macroeconomic Analysis | | | | |Juan Pablo Giraudo | | | | | |


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Macroeconomic Analysis of Japan


Japan is free market economy and third largest in the world as of 2010. Its population is roughly 130 million and it is also the world's fourth largest exporter and fifth largest importer. For these reasons, Japan in considered a developed nation. The GDP amounts to a total of 5.2 trillion in 2010. Due to its size, Japan’s GDP per capita is substantially high ranking them the 17th highest in the world at $41,000.

Japan’s industries are heavy exporters in many industries, mainly automotive and electronics. The total exports rank the country 4th in the world at 542 billion. The major trade partners are China, the United States, South Korea and the EU. Japan has some of top global brands that are ranked among the highest growing companies. Among these brands are Toyota, Honda, Sony and Canon. Due to the size and geographical character, Japan imports a lot of gods in order to fuel these exports and global leading brands.

The macroeconomic analysis performed shows Japan’s post war glowing decades where the countries industries developed significantly. Also, the analysis identifies the causes of economic stagnation during the past 20 years. Japan’s economy can be identified with low unemployment rate, elongated periods of deflation, high government spending, asset bubbles & Dotcom bubbles, and a surplus in the current account. In the paragraphs below, the analysis identifies the historic major events in Japan and examines the causes that make up the country’s economy today.

Timeline of Major Developments 1960-2010


1960-1980: Post WWII Japanese Economy Growth

After World War II, Japan’s economy develop profusely through high growth of industry, especially in manufacture and technology. During the 50’s, Japan’s economy grew via military spending due to the Korean War. Parallel to the war, an increase in individual consumption of home electronics leveraged Japanese economy. Throughout the decade known as the Golden 60’s, the government set the economic stimulus policy known as Double Income Policy. The policy aimed to double Japanese individual income through lowering interest rates, and tax cuts to induce spending. This strategy would initially increase public investment and exports, and produce gains in foreign currency trade. Conversely, the end result of the Golden 60’s resulted in an increase in Japanese standard of living. The Tokyo Olympics in 1964 augmented investment in infrastructure. In 70’s, the IZANAGI boom ended. The country faced some difficulties such as Oil Shocks triggered by the Arabic countries as energy prices increased significantly. Japan heavily relies on import of energies to fuel its manufacturing and technology industries.

1980-1990: Japanese Asset Price Bubble

The Japanese economic...

References: - Japan 's two lost decades (30 Dec. 2009)
- Deflation in Japan (30 Dec 2009)
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