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Slump Spurs Debate: How to Reshape Japan Inc.

Posted by: Kenji Hall on April 24, 2009

With the global economy now in a deep funk Japan’s export machine is idling. The latest evidence came this week, when Japan reported a trade deficit of 725.3 billion yen ($7.3 billion)—the first such shortfall in 28 years. The announcement was a stark reminder of how dependent the world’s second-largest economy was on the buying habits of companies and consumers overseas.

That has spurred a lively debate in recent months about the need to reshape Japan’s industries. The government’s Council on Economic and Fiscal Policy has made the discussion a top priority in the past month. But where and how to start remains a sticking point.

Tokyo could have used the latest stimulus package of public spending and tax cuts to spur a remodeling of industries. Instead it opted to spend a lot on public works, such as extending airport runways, building new train lines and subsidizing urban development. Economists I’ve spoken to were disappointed.

Even so, the CEFP may soon recommend a policy that helps companies for developing green technologies—electric cars, smart electricity grids, solar panels, and energy-saving appliances and portable gizmos that cut back on greenhouse gas emissions blamed for global warming. That would give companies the incentive to bet aggressively on nascent green technologies that they might otherwise be reluctant to channel resources to just yet. It could also lead to a new phase of factory building to replace some of the plants that Sony, Toyota, Toshiba, Panasonic have moved overseas.

That’s not to say that there has been a so-called hollowing out.

To be sure, the country’s biggest companies have been shifting production facilities overseas to offset the effects of currency swings on their earnings. It’s been happening for years, say economists and industry experts. But companies continue to develop and manufacture their core technologies—NAND memory chips, flat liquid-crystal-display panels and hybrid gas-electric cars—at home, says NLI Research Institute analyst Toru Hyakushima.

How dependent was Japan on overseas markets for its growth? For six years exports soared. They grew 75%, from 48.6 trillion yen in the fiscal year through March 2002 to 85 trillion yen in the year through March 2008. Japan’s factories were working at full tilt churning out chips, TVs, cars and chemicals, and exports were helping to haul the domestic economy out of its long recession. Then the financial crisis hit and the recession set in: In the latest year through March 2009, exports slipped 16.4% to 71 trillion yen.

Reader Comments


April 24, 2009 5:41 PM

Japanese people through hard work had overcome many challenges in its history like Oil crisis, WWII reconstruction, and this last one (aka Lehman crisis) will be overcome too.


April 27, 2009 4:34 PM

What i may be most concerned, it's about the social interest to do the fight, Japan have a long standing history overcoming issues, from the Meiji period and until the oil shocks and closing the tecnology gap with US during early 80's.
but after that Japan have remained farly stagnant.
One proof it's easily visible thru the corporate sector structure remains untouched, on the internet field new companies lagged to jump start, companies in the service sectors can't manage to raise productivity towards comparable levels to Western Europe or U.S, and that not to mention that wages have failed to grow even during the "good" times.
a big reform across the board it's requiered, along with changing attitudes, this also coming from young people to promote and encourage self-employment, not only to seek jobs at large companies.
Japan can do it, now it's not the struggle to catch up the west, but to keep up with the west.


April 28, 2009 5:25 PM

Japan does it because all Japanese are nationalistic and only buy Japanese products because they are brainwashed into thinking they are "superior" people. A very racist culture.


May 1, 2009 2:54 AM

I don't think the Japanese economy will recover just because there may be some signs of economic improvement in the next 18 months.

No one is looking at the biggest and strongest set of numbers that simply has not changed...the make-up and distribution of the population of Japan. In fact, even The Economist has not mentioned or analysed this in-depth.

Since Japan has ZERO experience with immigration...these sets of numbers will not change much at all in the next 20 years.

Take a careful look at the population distribution and make-up of Japan, factor-in some historical factors dealing with "Gaijins" and it should really shock you to say the least.

Alas, we will receive more nonsense about The Bank of Japan, GDP numbers, exports, manufactuerers numbers, and even the most useless government numbers about "stimulus packages."


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