Week 1: Business Environment of Japan – Social, Political, Economic and Institutional

Week 1: Business Environment of Japan – Social, Political, Economic and Institutional

“Introduction to Japan … Economic Stagnation in Japan – The Lost Decade … Japan’s Corporate, Banking and Government Sectors … Recession of 1998 and the Koizumi Era … Contemporary Japan – The Big Issues I … Contemporary Japan – The Big Issues II … Conclusion”
(Source URL)

Summaries

  • https://courses.edx.org/courses/course-v1:IIMBx+IM110x+1T2016/courseware/9745373e83c245329023e98b19a567fa/f6b38c64591b4820a25cfc5307382108/
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan - The Lost Decade > Japan in the Post World War II Era
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan - The Lost Decade > What led to Japan's 'Lost Decade'?
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan - The Lost Decade > Economic Impact of Stock Price Bubble Burst
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.3 Japan's Corporate, Banking and Government Sectors > Institutional Environment of Japan
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.3 Japan's Corporate, Banking and Government Sectors > Corporate Challenges
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.3 Japan's Corporate, Banking and Government Sectors > Role of Mafia
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.3 Japan's Corporate, Banking and Government Sectors > Role of Politics in Shaping the Business Environment
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan in the 90s
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan in Early 2000s
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Corporate and Banking Sectors in the Koizumi Era
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan's Globalization Concerns
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.5 Contemporary Japan - The Big Issues I > Preamble to Contemporary Issues
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.5 Contemporary Japan - The Big Issues I > The Economic Challenges
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.5 Contemporary Japan - The Big Issues I > PM Shinzo Abe's Three Arrows
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.6 Contemporary Japan - The Big Issues II > Role of Women in Workforce and Immigration Policy
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.6 Contemporary Japan - The Big Issues II > Aging Population, Rising Poverty and Inequality
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.6 Contemporary Japan - The Big Issues II > Rise of China and Other Diplomacy Issues
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.6 Contemporary Japan - The Big Issues II > Interaction With Learners
  • Business Environment of Japan - Social, Political, Economic and Institutional > 1.7 Conclusion and Weekly Assessment I > Concluding Video

https://courses.edx.org/courses/course-v1:IIMBx+IM110x+1T2016/courseware/9745373e83c245329023e98b19a567fa/f6b38c64591b4820a25cfc5307382108/

  • We will take a close look at the social, political, economic, and institutional environment of Japan.
  • Japan has had serious problems with economic stagnation since the 90s. These problems can be traced to structural factors such as the relationship between companies, employment laws or norms, and attitudes and regulations that discourage meeting skill shortages by allowing immigration.
  • As we go through the topics on Japan, we will see that some of our study is based on historical facts and figures.
  • We will then fast-forward to contemporary Japan, and look at the challenges it faces today.
  • Another important reason to study Japan is that some of the current problems reflect challenges that other countries also face, or will face in coming years.
  • Japan will play a critical role in the future global balance of power as China rises and eventually matches US power.
  • A little later, we will see that Japan’s relations with China are quite difficult and a major area of concern.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan – The Lost Decade > Japan in the Post World War II Era

  • Japanese incomes grew rapidly, and as I mentioned before, Japanese companies developed a very significant presence in important global industries, like automobiles and consumer electronics.
  • In 1990, the Japanese economy sank when an economic bubble burst.
  • The 90s came to be known as Japan’s lost decade.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan – The Lost Decade > What led to Japan’s ‘Lost Decade’?

  • Let’s start from the early 80s. In the early 80s, Japan and West Germany had large trade surpluses with the US. The US dollar was strong, partly because US interest rates were high.
  • Then in September 1985, the US, UK, West Germany, France, and Japan, which were the world’s leading economies decided to help the US by trying to push the dollar down.
  • The logic was that if the dollar were to become weaker and the Yen and the Deutsche mark stronger, that would have the effect of making American exports more competitive internationally and Japanese and West German products would become less competitive in foreign markets.
  • The representatives of the five countries met at New York’s Plaza Hotel and the accord got the name Plaza Accord.
  • German and Japanese exports became less competitive, and West German and Japanese economies were badly hit.
  • Japan’s Nikkei stock index rose a 130% and land prices tripled in cities.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.2 Economic Stagnation in Japan – The Lost Decade > Economic Impact of Stock Price Bubble Burst

  • Now, let’s look at the economic impact of the bubble bursting.
  • The Nikkei stock index reached a maximum of 38,915 in December 1989.
  • By 1996, urban property values had fallen 56%. Banks contracted lending, compounding problems.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.3 Japan’s Corporate, Banking and Government Sectors > Institutional Environment of Japan

  • As we saw previously, Japan faced serious problems as the economic bubble burst in the early 90s. These problems can be traced to certain institutional factors that were underlined in the Japanese banking, as well as in other sectors of the economy.
  • The economic crisis not only crippled the banking sector economically, but it also shed light on corruption as people began to look more closely at how the economy was functioning.
  • One of the basic challenges that Japanese banking had faced was how to adapt to changes in the 1980s.
  • Guess what? Japan agreed to make its banking sector more open and competitive.
  • Previously, when the interest rate was controlled, and every bank had to pay the same interest rate to depositors, the success of banks depended on customer relations.
  • Now banks could compete by paying depositors different interest rates.
  • Now, bank’s performance was dependent on multiple factors: How effective the banks were in obtaining lower cost capital, how much they were able to charge for the loans they gave their corporate borrowers, and how good they were at managing risk.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.3 Japan’s Corporate, Banking and Government Sectors > Corporate Challenges

  • We will continue with our discussion of Japan’s lost decade of the 90’s and how it affected the Japanese economy.
  • Companies felt they needed more capacity to meet the needs of customers and they made investments and hired workers.
  • When the bubble burst, the demand for their products vanished and the companies realized they had been misled.
  • Another serious problem for companies manufacturing products in Japan and attempting to sell them in foreign markets was that the Yen had risen significantly over the years.
  • This strategy irritated the U.S. government because it was seen as hurting U.S. companies and workers.
  • One side of this strategy was that Japan’s foreign exchange reserves increased significantly, and Japan became the largest holder of dollar reserves.
  • In 2013, Japan’s reserves were close to 1.3 trillion dollars and China’s reserves had grown to two and a half times as much, at 3.4 trillion dollars.
  • As Japan became more prosperous during the decades after the war, wages had risen and that made products manufactured in Japan relatively expensive in foreign markets.
  • The result of all this was that, some Japanese companies decided to move manufacturing out of Japan to countries like Malaysia and China.
  • In the late 90s, the Asian financial crisis struck some of Japan’s neighbours such as Thailand and South Korea.
  • Products made in Thailand, South Korea, and other Asian countries whose currencies fell during the crisis became more competitive compared with Japanese products.
  • Companies encouraged older staff to retire and held back on hiring new workers.
  • The Japanese were not as individualistic as people in some other countries like the U.S. The Japanese did not take to starting new ventures as readily as in the U.S. or in a country like Israel.
  • At that time, Japan also lacked strong institutional arrangements that support the formation and growth of start-ups.
  • Economic growth in the post-war period appeared to have benefited from some aspects of Japanese culture such as strong loyalty, and consensus among groups in decision making.
  • In the 90s however, it looked as if these same factors, that were so helpful before, such as group thinking, loyalty to companies within a keiretsu, and company loyalty to life-time workers were no longer helping Japan in fighting the economic problems it faced.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.3 Japan’s Corporate, Banking and Government Sectors > Role of Mafia

  • Stockholder meetings were short, and there was little discussion of important issues that might be controversial.
  • In 1994, about 2000 companies held their annual meeting on the same day, June 29th. While that spread the Sokaiya’s resources thin, it prevented legitimate stockholders from attending multiple meetings.
  • Now, over the years, the Japanese government passed laws and tried to limit the effect of the mafia on companies.
  • As a result of a law that banned payoffs to the Sokaiya, its numbers shrank from about 7000 to 1200 in the early 90s. The Sokaiya were what, one might call, “niche players” among a larger group of gangsters called Yakuza, whose roots go back four centuries.
  • With their traditional business in decline, the Sokaiya diversified into new lines, such as buying bad loans fro

Business Environment of Japan – Social, Political, Economic and Institutional > 1.3 Japan’s Corporate, Banking and Government Sectors > Role of Politics in Shaping the Business Environment

  • Welcome back! Until now, in the previous three units, we saw how an interplay of a number of institutional factors played a significant role in the formation of the economic bubble which eventually burst and led to Japan’s lost decade.
  • As in most democracies, Japan has some very strong special interest groups such as the farmers, and sometimes this makes it very difficult to implement change.
  • The LDP had a number of factions that competed for influence, and often the person elected to lead the party as Prime Minister found that he could not make significant changes owing to the influence of the factions, who in turn answered to special interest groups.
  • Japanese bureaucrats were relatively untainted by corruption till the mid 90s. Two of the most powerful ministries in Japan are the ministry of Finance and the Ministry of Economy Trade and Industry known as METI.
  • A lot was written about MITI’s power and role in making Japan competitive in the post-war decades.
  • These mostly male bureaucrats spent their whole career in government working long hours drafting laws and administering the country by fiat or through advice.
  • There was an interesting connection between Japanese bureaucrats and managers.
  • Typically, bureaucrats of important ministries and managers of major companies had started out together as contemporaries in the top universities like the University of Tokyo.
  • The result was that senior bureaucrats and senior managers knew each other very well, and this helped them agree on strategies to develop Japan during the post-war years, when there was great emphasis on strengthening Japanese companies so that they could compete outside Japan and also to protect the Japanese market from foreign companies.
  • Now, sometimes the policies that went into accomplishing these objectives of making Japanese companies internationally competitive were not considered to be fair and transparent by foreign competitors and governments.
  • Just as crossholding of stock among companies turned out to have negative consequences for Japan, the connection between bureaucrats and managers was also seen as having downsides.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan in the 90s

  • The recession brought unemployment to a post- war record high of 4.1%. In most economies, it is natural for prices to rise from year to year and countries usually worry about too much inflation.
  • Companies have fewer products to make and less money to pay as wages and this hurts the economy.
  • We will now look at the role of the Japanese government in the 90s and the policy decisions it took to reignite economic growth.
  • The Japanese government cut taxes so that people would have more disposable income and would spend more to create a cycle of economic growth.
  • Between 1992 and 1995, these stimulus packages consisting of tax cuts and public spending amounted to 75 trillion Yen or 700 billion dollars.
  • While these stimuli, softened economic problems, they failed to produce sustainable growth because the underlying structural problems did not go away, and the government could not afford to keep providing stimuli.
  • Now, when a government reduces taxes and increases government spending, it usually ends up with greater budget deficits unless, of course, it is one of those rare governments that runs a budget surplus.
  • The Japanese government has always had to worry about long-term consequences of stimulating the economy with tax cuts and public spending because its deficits have had to be funded by borrowing, and it has had high levels of debt.
  • He cut government spending, raised the national consumption tax from 2% to 5%, increased social security taxes and withdrew tax concessions.
  • The result was that demand dropped and the economy slowed.
  • Now, in the immediate post-bubble years, the Japanese government tried to revive the economy not only with fiscal stimulus, which consisted of tax cuts and public spending, but also with monetary stimulus.
  • The logic is-it is easier for people to get a loan and so consumers spend more and the economy begins to grow.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan in Early 2000s

  • He wore long flowing hair and was a fan of Elvis Presley, the American King of Rock and Roll of the 1960s and 70s. Koizumi adopted the slogan “Change the LDP to Change Japan”.
  • His website explained that “lion heart” referred to the prime minister’s lion like hair style and his unbending determination to advance structural reform.
  • Koizumi loosened the factional hold within the LDP and he softened the grip of the ministries.
  • In 2005, when his plans to privatize Japan Post were obstructed by the left leaning opposition party, the Democratic Party of Japan, and by vested interests within the LDP, he expelled 37 of the LDP’s parliament members.
  • He called snap elections and scored a decisive victory, demonstrating that the people supported change.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Corporate and Banking Sectors in the Koizumi Era

  • Companies had gradually created a more flexible labor force, reducing dependence on lifetime employees through attrition.
  • Companies filled openings with part-time workers who earned 60% less than full-time workers.
  • This group comprised of women or young unskilled men.
  • Now, while this helped the companies, it also had an effect in terms of increasing income inequality.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.4 Recession of 1998 and the Koizumi Era > Japan’s Globalization Concerns

  • Japan remained less globally integrated than many members of the OECD, the Organization for Economic Co-operation and Development, which includes the most developed countries of the world.
  • Japan had the lowest level of inward foreign direct investment or FDI as a proportion of its GDP. It also had the lowest level of imports and had the smallest ratio of foreigners in its labor force.
  • The OECD estimated that Japan’s per capita GDP would be 4.4% higher if it reduced the external and internal barriers to the level of the least restrictive OECD member.
  • Some of Japan’s rules and regulations also created barriers.
  • Its rules about mergers and acquisitions of companies, some of its product market regulations, and its labor laws-all discouraged restructuring.
  • Another interesting fact was that there was lower penetration of imports into Japan compared to the U.S. and the European Union.
  • Japan had much greater trade with Asia than with other regions, and China’s importance as the trade partner had increased over the years.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.5 Contemporary Japan – The Big Issues I > Preamble to Contemporary Issues

  • In this segment, we will focus on the current or recent social, political, economic, and institutional environment in Japan.
  • I also wanted to point out how a charismatic leader like Koizumi who has strong backing of the people and is determined and capable can change institutional factors.
  • Japan’s economy was hurt, and even today, the country is struggling to recover.
  • Japan’s current Prime Minister, Shinzo Abe, assumed office about three years ago in December 2012.
  • Mr. Abe put greater power in the hands of his cabinet managed by, the Chief Cabinet Secretary, Yoshihide Suga.
  • Mr. Abe has also chosen to focus on important priorities rather than a larger, more diffused set of objectives.
  • Mr. Abe initiated an impressive economic turnaround, and won a renewed vote of confidence in July 2013 when the LDP won control of the upper house of parliament.
  • Mr. Abe further consolidated power by calling for snap elections in December 2014.
  • Despite having such a strong mandate, Mr. Abe is being careful not to rush changes that could be unpopular and result in removing him from power.
  • Now, after having Abe as their leader for nearly three years, the people’s initial euphoria has been replaced with doubt about his ability to institute structural reforms which are important for securing long term growth and managing foreign relations in an increasingly tense neighborhood.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.5 Contemporary Japan – The Big Issues I > The Economic Challenges

  • In 2010, its GDP growth had touched 4.7%. But then, very unfortunately, in March 2011, the northeastern part of Japan was devastated by a deadly earthquake and tsunami which killed over 20,000 people and left a 100,000 homeless.
  • Manufacturing supply chains were disrupted, factories could not get critical parts, and production came to a halt in the region and slowed down in other places-even in some foreign countries that relied on supplies from Japan.
  • Given the devastation and destruction, Japan’s GDP fell by 0.4% in 2011.
  • While growth turned positive in 2012 and 2013 in the range of 1.6% to 1.7%, the economy slipped into recession in 2014 after a sales tax hike, closing the year with slightly negative growth of 0.1%. Another big challenge for Japan is that of very high public debt, which stood at 226% of GDP at the end of 2014-one of the highest among developed countries.
  • Moody’s reduced Japan’s credit rating in December 2014 and Fitch did the same, a few months later.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.5 Contemporary Japan – The Big Issues I > PM Shinzo Abe’s Three Arrows

  • Welcome to the third unit of this series on contemporary Japan, where we will take a look at Prime Minister Abe’s strategy for reviving Japan, which has come to be known as Abenomics.
  • These are fiscal stimulus, monetary stimulus, and structural reform.
  • Mr. Abe started out strong quickly reviving the economy in 2013 with the first two of the three arrows, fiscal and monetary stimulus.
  • Within two months of assuming office, Mr. Abe got parliament to approve an economic stimulus package and appointed Haruhiko Kuroda as Governor of the Bank of Japan.
  • Japan’s Asian markets were sluggish causing exports to decline 0.6%. On the other hand imports grew 2% as the cost of energy imports rose and new models of the iPhone flooded Japan.
  • A big challenge facing Japan today is that while inflation has picked up in the last two years, in line with the Bank of Japan’s efforts, wages unfortunately have not risen.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.6 Contemporary Japan – The Big Issues II > Role of Women in Workforce and Immigration Policy

  • This course is about the social, political, economic, and institutional environment of different countries, and Japan is one of the important countries we are studying.
  • We are trying to understand various aspects of Japan and among the things we hear that are important is that the role of women in Japan is something that makes a big difference to the economy and other aspects of life and I thought I would ask you what you felt about that.
  • Dr. Hiroshi Ono: Well, I think the, in the big scheme of things, the Japan is going to come under labor shortage in the long run, right? We need to tap into three demographic groups that have been untapped before and that comes down to old people, women, and foreigners, i.e. immigration, right? So, in that context, the Japanese government is trying to really expand the supply of those three demographic groups.
  • Very, very big challenge, right? And the, and lot of, the challenge as a matter of fact a lot of the LECD countries confront.
  • We need a way for women to continue to work after they have children, right? So, we need some governmental support and we also need some help from the private sector.
  • It’s, it is a big challenge because like even recently, like these polls show that women actually prefer to stay at home, right? So, like, if you take these surveys, maybe 40%, a big part of the female population, if they had a choice, would rather to stay at home and not work, right? So, how are we going to change that is another big challenge.
  • Up until like the 1850s, Japan was a completely isolated country, right? And the idea there was that Japan could be self- sufficient that, we don’t need outside help, and so, Japan was completely closed to trade as we know it.
  • There was absolutely no flow of goods in and out of Japan, no flow of people in and out of Japan, right? So it was completely closed off to the outside world as we know it.
  • Now you can fast forward to the contemporary time period, and up until recently, Japan was also like very much closed off to like Foreign Direct Investment or FDI.
  • At the same time there was some talk about human capital, right? That perhaps we can learn from the intangible benefits of FDI, and that will be in the form of high skilled to professional managerial skills.
  • I mean, we have a shrinking population and a shrinking working population, and we seriously need a bigger working population regardless of skill, right? And I think that Japan needs to, first, confront that problem and then take specific measures to see how we can tap into those resources.
  • Now, like one of the obstacles to immigration right now, or the foreign working population here is that a lot of Japanese companies don’t have, as a requirement, proficient Japanese language skills, right? And, obviously, and Japanese is a very difficult language to master, and to have that kind of a requirement for jobs, seems unrealistic if not discouraging, right? And so, how acute is the labor shortage problem? It’s very acute.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.6 Contemporary Japan – The Big Issues II > Aging Population, Rising Poverty and Inequality

  • Some estimates point out by year 2050, there’s the 40% of the population is going to be over the age of 65, which is very very alarming, right? So, if you had an opportunity to take public buses or visit hospitals in Tokyo, you will witness this first hand, that yes, wow this place is a really graying society, right? So, one problem in terms of equality that it’s a direct outcome of aging is that we have a separation between young people and the old people.
  • This is a consequence of the lifetime employment system where traditionally in the good years like the 50s and the 60s, people enter the labor market and they had a pretty generous employment system which guaranteed, provided generous jobs security to the people that were employed so we call this the lifetime employment system.
  • What they did was instead of, you know, firing the people that were already in the lifetime employment system, they stopped hiring, right? So, like, of course, what this resulted in the separation between the old and the young because the old people continued to enjoy the benefit from the job security and all of a sudden the young people couldn’t get those good jobs, right? So, what we have in Japan right now, in terms of the labor market is this, the young people are unable to get good positions, good reliable positions in good jobs that they used to have, right? So, we have a growing population of non-standard workers, non-standard part-time workers, and a shrinking population of standard workers, right? So, that’s the separation between the young and the old people.
  • The second inequality that I can think of is that as a consequence of the economic expansion, as a natural consequence of capitalism at large is that we started to see an increase in income inequality, right? The Gini coefficient, when I last checked, was at 0.3, right? And so, this is actually not alarming level inequality as I see it.
  • So when I talk about inequality, I think, there’s like a, there’s really no optimal level of inequality, right? So, what is good and what is bad? I think, in my view to be an industrialized country like the United States and to have a Gini coefficient of greater than 0.5 is kind of a problem, because then you start to see a big separation between the rich people and the poor people, right? If you have too much distance between the rich and the poor, then people on the lower end of the income scale could feel very much discouraged, I think.
  • The U.S is in a pretty good position, but Japan is three to one and it’s going to get worse, right? So, just pension system is something that we all need to worry about, and I’m worried about that myself.
  • There is a little bit of inequality in a sense, like, you know, where you’re employed, it kind of determines how generous the benefits are, right? So, but there is, like, a basic level of government subsidies in terms of child care facilities, and also paternity leave.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.6 Contemporary Japan – The Big Issues II > Rise of China and Other Diplomacy Issues

  • The rise of China as an economic and military power has caused great concern in some countries- especially Japan, given its close proximity to China and its strained relations with its neighbors.
  • Relations between Japan and China are also tense because of territorial disputes over gas reserves in the East China Sea.
  • In 2010, when Japan detained a Chinese fishing boat in disputed waters close to the islands known as Senkaku in Japan and Diaoyu in China, Japan had to back down after China halted export of rare earths critical for Japan’s electronics and auto industries.
  • Standing beside Prime Minister Abe in Tokyo in April 2014, U.S. president Obama stated that the US-Japan Security Treaty included the Senkaku islands, though the U.S. did not take a position on conflicting claims of sovereignty by Japan and China.
  • One of the reasons, why Prime Minister Abe had backed Japan’s inclusion in the proposed trans- pacific partnership trade agreement was to strengthen relations among Asian countries and with the U.S. and reduce China’s influence.
  • India remained neutral in the posturing between the U.S. and Japan on one hand and China on the other.
  • Given the way the balance of power is shifting, Japan is anxious, not only to ensure U.S. support, but is actively exploring collaboration with India, Australia, and other countries to counter China’s rising power in the Indo-Pacific region.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.6 Contemporary Japan – The Big Issues II > Interaction With Learners

  • Jennifer Vincent: Welcome to this discussion forum on Japan and its framework for country analysis We took a look at the social, political, economic and economic environment of Japan in the Post World War era.
  • While Japan did spectacularly well in the immediate post war years, it didn’t do quite well in the 1980s and the 1990s.
  • As a third largest economy, Japan has a lot of strengths in its favor.
  • What do you think are the major strengths of Japan? Debaprasad: Thanks, Jennifer.
  • As we know all know that Japan is not an immigration friendly country so they are not get the learnings from the outside world right now.
  • So all the countries have become export oriented, they have commoditized the innovative learning which Japan has developed for the world.
  • So these are the few challenges that I feel Japan has now Jennifer: Okay, now that we are talking about challenges, I want to know what are the major weaknesses or weak points of Japan? Dev: Great question, Jennifer.
  • Everything else that we see in modern Japan and try to brand as a problem is really either a manifestation of or a contributing factor to either of these two problems.
  • Jennifer: So you just spoke about the internal problems of Japan.
  • Could you just tell me that have these internal problems actually led to recession in Japan? Dev: Yes.
  • Now contributing factors to those were really aging population, emergence of China as a low cost manufacturing hub and there was corruption, there were natural disasters, as we all know about Japan and then there was a gradual decline of Japanese corporate biggies like Sony, Panasonic.
  • These challenges were like old ways of doing business in Japan and there was the problem of Yakuza, which was really a Mafia organization that has a huge hold on the corporate Japan, then there was a whole problem around expats as we term it in modern days as Xenophobia, and then there was a lack of entrepreneurial spirit in modern day Japan.
  • We don’t see the kind of Sonys coming out of Japan these days.
  • So all of these together kind of made it difficult for Japan to come back and recover from recession and the list that I just spoke of is really what I meant when I said that every other problem is just a manifestation of or a contributing factor to the two problems that I cited at the very beginning.
  • Jennifer: So Japan is indeed reeling with a lot of internal problems.
  • Sanket: So we have a problem where Japan is a is a developed economy.
  • A country like Japan should really be a magnet for foreign nationals or foreign educated nationals to go settle there and work for companies or start their own companies.
  • Because foreign investors always look for, in a country where their investments are safe So why would a foreign investor look at long term committments in a country like Japan where they know that hiring and firing policies are really stringent and they would have a really bad time with the government facing the questions.
  • Japan could look at a fail fast model, something very similar to like Silicon Valley, where a lot of companies get started new ideas and there is no social stigma associated with failing.
  • Jennifer: So what can the current leadership in Japan actually do now in this case? Sanket: They could tie up with other foreign companies in specific sectors.

Business Environment of Japan – Social, Political, Economic and Institutional > 1.7 Conclusion and Weekly Assessment I > Concluding Video

  • We got to see how the business environment of Japan over different periods in the last 30 years was shaped by interplay of social, political, economic, and institutional factors.
  • The political factors were both domestic and international.
  • The domestic factors included factional politics and the power of special interest groups.
  • The international factor that stood out was the rise of China and the changing global balance of power.
  • The major economic factors were Japan’s fiscal, monetary, and foreign exchange problems.
  • Examples of the institutional factors we considered are business-government relations in Japan and the structure and management of the education system.
  • We saw how these social, political, economic, and institutional factors contributed to economic decline and the lost decade, which in turn exacerbated poverty and income inequality.
  • We saw how the factors create challenges today for companies manufacturing in Japan to be globally competitive, and for innovation and entrepreneurship to help revive the economy.
  • Even though Japan is famous for many creative inventions such as, the Shinkansen and the use of robotics in manufacturing, which have been emulated all over the world.
  • As we discussed this week, there’s another meaning attached to institutions, which is norms and rules that exist in society that have become durable and persist for some time.
  • In summary, we saw that Japan’s period of miraculous growth after the Second World War was interrupted when the economic bubble burst and led to the lost decade.
  • Time and again, the government tried to revive the economy with fiscal and monetary stimuli, but institutional factors came in the way.
  • We will discuss how the social, political, economic, and institutional context affects countries’ objectives, strategies, and policies, and how that affects the economic growth of countries and the welfare of their people.
  • All this affects the operations of companies, governments, and non-governmental organizations and their actions and those of other stakeholders, in turn, shape the context.
  • These rules affect business and society in the country and create opportunities and barriers for local and foreign companies.
  • We will examine the case of pricing of AIDS drugs in the early 2000s to see how that was affected by the context of South Africa, which suffered the highest incidence of AIDS, and by the context of developed countries that were homes to the world’s leading pharmaceutical companies, as well as by the global rules for transfer of intellectual property governed by the World Trade Organization.

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