Japan Content •A. Basic characteristics •B. Until 1868 •C. Meiji •D. Inter-war period •E. Post-WWII period •F. Economic miracle •G. The 1970s •H. The 1980s Basic characteristics A. Basic characteristics •one of the most developed countries in the world •GDP p.c. (PPP) around 36 600 $ X USA 54 600 $ •3rd measured by econ. strenght (according to EX rates) •127,8 mill. inhabitants •hilly landscape, 4 islands •lack of natural resources •structure of the GDP (2015) - A = 1,2 %, I = 26,6 % a S = 72,2 % •small government •(EX + IM)/ GDP = 23 % Until 1868 B. Until 1868 •old culture – 4 000 before BC •I. Europeans = the Portuguese 1542 •beginning of the 17th century shogun Tokugawa strict isolationism •X Christianization and colonization •trade only with NL and in limited amount •+ ban on travels abroad •isolation = peaceful and stable period ð creation of national identity BUT lagging behind in technologies •1853 and 1854 am. commodore Matthew Perry 2x sailed to the Tokyo harbor è opening of JP •diplomatic relations and so-called „unequal treaties“ •JP forced to impose not higher than 5% import tariffs •unrests X shogun X foreigners è emperor Mutsuhito in 1868 MEIJI • C. Meiji (1870-1912) •no isolation but distance from foreigners •change of the old feudal system – following the best example: •bureaucracy - France •army - Prussia •navy - GB •industry + financial mechanism – mainly USA •education – western countries •finance •before the reform – nonconvertible paper money •to build new bank system according to USA •1877 revolt of Sacuma Klan ð need of money ð issue ðñ inflation ðbank system blamed •ðreform of CB (Bank of Japan) according to Belgian example = monopoly on the emission of money in circulation •+ commercial banks accroding to GB •1897 joining the gold standard •industrialization •only non-western country in the 19th century •at that time JP fully agricultural economy •government built and run western manufactures •promotion of private entrepreneurship •sale of factories and mines immediately after having reached economic stability •government kept only military productions •the fastest growing industry – silk industry •heavy industry – slower growth despite tariff protection •zaibatsu … Zaibatsu •industrial conglomerates •establishment in Meiji •family-controlled conglomerates + bank included + cross-shareholding + personal relations + subcontractors •impact on the spread of modern (heavy) industry •Mitsui, Mitsubishi, Sumitomo, Yasuda •inter-war period – economic and political influence but rarely monopoly Economic results •from 1970s to WWI •average annual growth of GDP = 3% (estimates from 2,4 to 3,6%) •ñ manufacturing industry by 5% • •ñ EX: in 1980s = 6 - 7% GDP ð during the first decade = 15% ð 1915 > 22% Japanese aggressions •with economic growth also political influence •1894 - 95 defeated China = annex of Taiwan •1904 - 05 defeated Russia •1905 protectorate over Korea ð1910 annexed ð imperial power •WWI (passively) on the side of the Entente ð •winner •ñ EX •gained DE colonies in the Pacific ocean •gained Chinese territories •regional power Inter-war period 1.Political development 2.Economic development D1.Political development •political and militant ambitions •East Siberia X USA •military regime •still expansive plans x China •1932 Manchuria •1937 war with China •1939 a puppet state X Chiang Kai-shek • •since 1/2 1930s ties with fascist powers •1936 Anti-Comintern Pact with Nazi Germany •1937 fascist axis Berlin-Rome prolonged to Tokyo • •December 1941 - Pearl Harbor – attack on USA •6 months successes BUT in LR am. economy •1942 Battle of Midway •1945 nuclear bomb • •1945 defeat •USSR – Kuril Islands Battle of Tarawa 20 to November 23, 1943 •Japanese 4, 836 •soldiers and laborers •4,690 killed 17 soldiers captured 129 laborers captured • •US casualties 1,696 D2.Economic development •after WWI •inflation •1922 stabilization of prices • •gold standard •late return in January 1930 •within Sterling block •at the end of 1920s slower growth x others •1927 bank crisis BUT WE not affected •less intensive engagement in WE •The Great Depression •not effected as much as the other countries •rapid recovery •problems: a)commodity market b)finance Industrial production in selected countries (1929=100) 1927 1928 1929 1930 1931 1932 1933 1934 1935 France 79 91 100 100 89 69 77 71 67 Germany 102 99 100 86 68 53 61 80 94 Italy 92 100 92 78 67 74 81 92 Japan 83 90 100 95 92 98 113 129 142 Poland 87 100 100 82 70 54 56 63 66 GB 96 94 100 92 84 84 88 99 106 USA 89 93 100 81 68 54 64 66 76 Source: Fearon, The Origins and Nature of the Great Slump 1929-1932, 1979 •a) Commodity market •silk as very important export commodity •dramatic fall in prices 1929 1930 June September December March June September December 4.96 5.2 4.68 4.68 3.56 2.93 2.69 Prices of silk in (dollars/pound) during the Great Depression Source: Kindleberger, The World in Depression, 1973 •b) finance •devaluation of the pound •ê •traders - sale of yens •ê •outflow of AU •ê •Bank of Japan – ban on EX of AU •ê •December 1931- gold standard abandoned •After the crisis: •successful economic policy mix a)fiscal DEFICIT + ñ G (mainly military expenditures – China + preparation for WWII) b)monetary policy - ò interest rates c)wage policy – fixed wages d)foreign exchange policy – devaluation of yen and flexible EX rate ðñ EX e)+ exploration of northern China – human and material resources Volume of Japanese exports in 1913-1958 (1913=100) Results •fast recovery followed by uninterrupted growth after 1932 •ò unemployment and in the first stage also ò of inflation •The war could not be won because of economic reasons 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 174 159 160 167 171 174 178 193 214 231 295 Inflation in Japan in the 1930s (1913=100) Source: Maddison, Dynamic forces in Capitalist Development, 1991 Armament production, 1940-1943 (in USD billion of 1944) 1940 1941 1943 GB 3.5 6.5 11.1 USSR (5) 8.5 13.9 USA (1.5) 4.5 37.5 Allies total 3.5 19.5 62.5 Germany 6 6 13.8 Japan (1) 2 4.5 Italy 0.75 1 - Axis total 6.75 9 18.3 Source: Kennedy, Vzestup a pád velmocí, 1996 Post-WWII PEriod E. After WWII •situation: •economy destroyed •hyperinflation •return of repatriates •loss of colonies = loss of raw materials •loss of foreign INV •reparation (small and temporary) •total isolation •main problems for allies (USA) •demilitarization of the economy and society •democratization of the society •1945 restoration of political parties •1946 – elections ð government led by Shigeru Yoshida •US system of indirect management ð decisions of the occupation authorities put into practice by the Japanese government • ð new (dictated) constitution •limits on military expenditures ð more effective use •ban on participation of JP military troops abroad • demonopolization •abolition of zaibatsu •agriculture ð agricultural reform •Finance • ñ economy – especially industry • •decrease of inflation year 1944 1945 1946 1947 1948 1949 1950 CPI 688 1,011 60,048 129,104 235,896 311,386 298,944 Consumer prices index in Japan (1914=100) Source: Maddison, Dynamic forces in Capitalist Development, 1991 Structure of the Japanese economy (shares in %) Year Workforce Agriculture Industry Services 1870 70.1 - - 1950 48.5 21.8 29.6 1975 13.8 34.1 51.8 1985 9.3 33.1 57.3 1995 6.0 31.6 61.8 2000 5.0 29.5 64.3 Source: Statistics Bureau, http://www.stat.go.jp/english/data/figures/index.htm#b, (20. 12. 2006) •Results: •after war ò production + ò standard of living + ñ social pressure ð worsening situation ð USA: ò reparations + loans to food… •stabilization of the economy in 1948 •1950 practically deflation + later only one-digit inflation •econ. Growth initiated •cold war (Korea, China) ð change of US attitudes •1951 assignment of the peace treaty + end of the occupation (BUT …) Economic miracle F. Economic miracle •very fast economic growth •ê •Japan - > economic power • •Reasons of reconstruction and economic miracle: • •1. post-war recovery plan •2. Korean War •3. high savings and INV •4. technologies •5. labour market •6. managerial methods •7. corporate structure •8. ñ EX + protection of the domestic market •9. economic policy •10. stable political situation Japanese GDP per capita, 1950-1998 (USA = 100) Source: Maddison, Historical Statistics - http://www.ggdc.net/maddison/ (11.10.2008) 1. post-war recovery plan (1948 - 1952) –american experts –the most important mission led by J. M. Dodge ð Dodge line - successful •ò growth of prices •ñ production •INV concentrated to 4 sectors •coal industry, steel industry, power engineering and shipbuilding 2. Korean War –orders for the US army è conjuncture in JP ð level of industrial production in 1951 > pre-war level 3. savings and investments • high and growing • issue of quality of investment projects 4. Technology • import of licenses • Reverse engineering Year Savings as percentage of disposable income Gross fixed capital formation [% of GDP] nominal real 1955 13.9 10.8 7.7 1960 17.4 19.6 14 1965 16.8 15.3 13.3 1970 20.3 19.8 20 Japanese savings and investments (1955–1970) •5. labour market • educated LF + cultural values (discipline, …) • institution of lifetime employment • seniority principle = remuneration based on the length of employment rather than on performance • •FOR IT: – loyalty and diligence – acceptance of the authority of superiors – share on the firm´s revenues • ð very low U over a long period • ð + many seniors in the management of firms+ big supervisory boards • karoshi– overwork death •6. managerial methods • • attempt to maximize market share nad not profit •characteristics: •strategic management = establishment of relations between organization + customers + suppliers •low introductory prices •higher prices for materials but longer contracts •just in time = to minimalize stocks at all level of production •in practice – shift of costs to subcontractor •support of inventions •total quality management •circles of quality •team work •7. corporate structure ·strong enterprises + subcontractors ·subcontractors often absorbed ò demand ·keiretsu ·after WWII dissolution of zaibatsu ·in 1950s restoration of conglomerates = keiretsu ·industrial companies grouped around a bank + cross-shareholding ·mutual links weaker as in zaibatsu 8. ñ EX + protection of domestic market • ñ EX but pre-war level only 1958 • since 1954 „export - led growth strategy“ • support of EX: – EX market recommendation – support of industrial sectors • gradually serious competitor • •simultaneously – strict protection of the domestic market –tariff and non-tariff barriers Volume of Japanese Exports after Pacific War (1913 = 100) •9. economic policy • • active role of the state •but low degree of formal planning •gov - influence on the economy through friendly relations between politicians, industrial authorities and large banks ð • indicative planning • future conceptions • conditions for smooth functioning of the private sector •simultaneously low share of the state and informal sector •institutions •Economic Planning Agency (EPA) •Ministry of International Trade and Industry (MITI) •cornerstone of the JP EP •„adoration“ of MITI • ambiguous results •10. political stability • •democracy (forced by USA) •since 1955 practically governed by only one political party – Liberal Democratic Party of Japan •true also for the presence Results •dramatic economic ñ •ñ GDP p.c. •low U •acceptable P •ñEX + BofP surpluses •ðð Japan as regional superpower and one of the world economic centers The 1970s G. The 1970s •the beginnig of 1970s = the peak of miracle è later ò dynamics •serious impact of the raw material crisis •diversion from raw material-demanding production •implementation of energy-saving facilities + new technologies •ò capital accumulation •ò LF growth •ñ inflation (1974 > 20%) •2nd Oil Shock - less effected than by the 1st Oil Shock •energy- and material- saving technologies Average annual growth in Japan in five-year periods Period Real GNP Gross fixed capital Labour 1955-60 8,9 7,9 2,2 1960-65 9,7 11,0 1,7 1965-70 11,6 13,0 1,8 1970-75 4,7 10,3 0,4 1975-80 4,9 6,3 0,9 Source: Kosai Japan´s Growth Problem in Harberger, World Economic Growth, 1991 Economic growth and inflation in Japan, 1956-1990 (%) •changes in economic policy •liberalization of the financial market •EX rate policy •floating – appreciation of yen •= unfavourable for EX but IM 9/10 raw materials and intermediate products •elimination of subsidies and taxes • •in 1970s one of the most fast economic growth BUT not the after-war dynamics The 1980s H. The 1980s •considerable economic ñ •low U •low inflation •BUT large external imbalances = active trade balance •ð current account surpluses + high S ð the largest exporter of capital •FDI to USA and Eur + financing of US budget DEF •ð 1985 program Maekawa •attempt to reduce trade disputes with USA and EU •ò dependence on EX •ñ importance of domestic D • ð liberalization of FT •1985 – Plaza Accord – between USA and JP ð interventions ð revaluation of yen •expansive monetary policy ð excess of liquidity •CB only partial responsibility b/c large pressure of Ministry of finance to keep low r to ñ AD = help from USA ò trade deficit •2nd 1/2 1980s speculative ñ on the exchange stock •+ ñ prices of assets and real estates •banks as guarantee shares + real estates ·finally CB ñ r ð stock exchange crash (December 1989) ·BUT CB keep high r X repetition of speculative boom ð 1990s ·X FED 1987 Prices of real estates in six major cities in Japan (2000=100) Source: Statistics Bureau, http://www.stat.go.jp/english/data/chouki/index.htm (2. 3. 2007) TOPIX Tokyo Stock Exchange Index and the volume of trade The 1990s •economic stagnation – recession in certain years •increasing U + undervaluation •weak demand •+ continuous monetary restriction ð deflation •ò stock exchange and prices of real estates •continuous problems of banking sector •fiscal expansion •1992-99 8 programs for economic recovery – public services, financing of banks, requalification •e.g.1999 budget deficit = 10% GDP – debt > 120% GDP Japanese GDP (year-on-year change in %), 1980-2016 Year-on-year inflation in Japan CPI and deflator (%); volume of nominal GDP (JPY billion), 1991-2008 Source: IMF: World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2008/02/data/index.aspx (25. 2. 2009) Japanese fiscal balance, net and gross national debt, 1980-2008 (% of GDP) Source: IMF: World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2008/02/data/index.aspx (25. 2. 2009) http://cdn.static-economist.com/sites/default/files/imagecache/original-size/images/print-edition/2 0140628_ASC223_0.png Thanks for your attention