Video #1 - Economic Recovery in Japan
Wednesday, January 05, 2005BACKGROUND INFORMATION
The latest report from the Japanese government shows Japan's economy is continuing to expand: it posted its second consecutive quarter of growth between April and June, 1999. Exports and industrial output posted impressive gains. The Japanese Gross Domestic Product (GDP) grew by 2.0 percent in the first quarter of this year, and 0.2 percent in the second quarter. That was a surprise to those who expected a decline or--at best-- no growth.
The June 10 Economic Planning Agency announcement of the economic turnaround in the first quarter took everyone by surprise. Although the jump in public sector spending was largely anticipated, the strength of consumer expenditures and capital spending was not.
The Bank of Japan, however, remains cautious. It noted several factors could keep the economy from expanding: consumer demand remains weak; unemployment is at a record high 4.9 per cent; corporations will continue to restructure, putting more people out of work; also, the yen has increased in value by 40 percent against the U.S. dollar in 1999. (The higher the yen, the more expensive Japanese products are for consumers abroad). The Japanese currency's value may also be related to policy disputes between Washington and Tokyo as well as to domestic Japanese politics. The Clinton Administration may not want Japan to export its way out of recession. Letting the yen rise is a way of putting pressure on Tokyo to come up with another big economic stimulus package. If the yen's run-up continues, and pressure for a stimulus package rises, then Tokyo would face fresh concerns about increasing the government's budget deficit further, with possibly destabilizing effects on long-term interest rates.
Moreover, the government of Keizo Obuchi faces a lower house election sometime over the next 15 months. Obviously, the government would want to hold off on a stimulus package so it coincides with the election and it can claim that it successfully began the process of economic recovery for Japan. One opinion is that if the yen rises relatively slowly, Washington will get its way and Tokyo will face rising pressure to do something on domestic economic policy, the politics of the situation notwithstanding. It follows that if the yen surges (and the dollar appears to be crashing), the Clinton Administration would abandon what appears to be its strategy and join Tokyo in what would probably be successful currency intervention to stabilize the yen and the dollar.
Nevertheless, low interest rates and the increase in government spending are credited for Japan's economic recovery. Other factors are the relentless growth of the American economy and the restructuring going on in other countries in Asia in the wake of the collapse of their economies. Over the past few years, the Japanese government has spent more than $1 trillion on stimulus budgets. It also bailed out the banking system.
Opposition politicians are calling the government's practices irresponsible. Japan is now more indebted on a per capita basis than Italy. Its borrowing is reaching levels never before seen in the industrial world. To some it is like using a credit card-- someone will have to pay in the future. Despite the worry over debt levels, government spending is exactly what the rest of the world has been calling for to maintain economic stability. Japan is the world's second-largest economy. There are fears that if Japan collapses, the rest of the world would go down with it.
Additionally, Japan is looking westward to find ways to make its companies run more efficiently (certainly a turn in events). One of the tactics corporations are adopting is restructuring. That means rethinking the social contract that existed between companies and their employees: a job for life in exchange for loyalty and hard work.
There are other companies, started by young entrepreneurs starting small companies and going against the established traditions. Hiroshi Mikitani, who runs one of Japan's hottest Internee (temporary help) companies, told CBC News Online that Japan is changing rapidly. The quest for lifetime employment is no longer possible. Yet society does not hold you in the same regard if you set out on your own.
Finally, while most analysts express skepticism about the variance of the data recently released about Japanese recovery, the critical point is that GDP data generally are of better quality. They are comprehensive across more types of economic activity and are more carefully adjusted for price changes, seasonal factors and other variables. Another reaction from analysts acknowledges that the figures mean something - that the Japanese economy was, and is, in better shape than most analysts had realized. The newer, more comprehensive numbers mean that consumer spending is growing, not shrinking. As the reality sinks in, attitudes toward Japan in Washington and elsewhere are likely to become more optimistic.
SOURCES:
Hadzipetros, Peter. "Japan in Transition". CBC NEWS ONLINE. cbcnews.cbc.ca/newsindepth/japan.economy.html Anonymous, "Japanese GDP Report Fuels Optimism". JEI's Spin on the News, The Japan Economic Institute of America. http.//JEI.org/
LESSON PLAN
GRADE LEVEL/SUBJECT: 10-12/Economics, International Relations, World History, International Bachelaurate Programs(IB), Current Events.
PURPOSE: to present activities to be used at a variety of classroom situations in order to enhance student understanding of Japanese economy and its significance globally.
OBJECTIVES: Students will be able to:
- explore the present state of the Japanese economy.
- evaluate the role of the Japanese government in the economic recovery of the nation.
- analyze economic indicators such as Gross Domestic Product, unemployment rate, consumer expenditures and capital spending to determine the process of recovery in Japan.
- describe and evaluate the short term and long term goals of the policies adopted by the Japanese government to change the course of economic events.
- describe and evaluate the changes instituted by Japanese businesses in light of the economic problems faced by the nation.
- predict the future of the Japanese economy.
MATERIALS:
- Background information provided.
- Resources on Japan available at your school's Media Center and the Public Library System in your area.
- Background information available through Internee "search engines".
- CBC NEWS ONLINE. cbcnews.cbc.ca/newsindepth/japan.economy.html
- Japan Economic Institute of America. http.//JEI.org/
- Morgan Stanley Dean Witter. www.ms.com
- http://www.epa.gp.jp/
- Sakaiya, Taichi; Minister of State, Director-General, Economic Planning Agency, Government of Japan. "The Present and Future of the Japanese Economy." Address delivered in Singapore, September 1, 1999 and in Bangkok, September 3, 1999.
ACTIVITIES: May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Hold a formal debate about the state of Japanese economic recovery. Opposition politicians vs. Economic Planning Agency spokespersons.
- Write an editorial about the recovering Japanese economy from the point of view of a variety of individuals at different stages of their lives. Ex. A young entrepreneur starting a new company; a "company man" developing a restructuring plan for his company; a young woman entering the work force; an investment banker from the United States.
- Read and analyze "The Present and Future of the Japanese Economy" address by Taichi Sakaiya, Director of the Economic Planning Agency of Japan. Write an editorial response. Hold a class panel discussion of divergent reports.
- Having evaluated the above information, create a scenario for the Japanese economy in the year 2010.
EVALUATION: Individual assignments should be graded by the teacher using established criteria. Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale:
Content 1=Superior(A) Creativity 2=Excellent(B) Clarity 3=Good(C) 4=Fair(D) 5=Poor(F)
