Posts tagged Japan

Is Abenomics Coming to a Halt?

Abenomics

Abe Shinzo, the Japanese Prime Minister, advocates yen devaluation

Wall Street Journal: Abenomics Will Be Felt Beyond Yen

Hankook Ilbo(Korean): 아베노믹스 ‘거꾸로 효과'(Abenomics ‘Reverse Effect’)

Abe Shinzo had explicitly announced that he would artificially devalue yen in the hope that this will help its export-dependent economy. His idea was that devaluation of yen against other currencies, especially USD, would improve price competitiveness of Japanese products overseas. This announcement was quickly criticized by many nations dependent on export such as Korea and Germany.

The Japanese government said that it would pump ‘infinite’ amount of money supply in the economy until it reaches its target inflation rate of 2%, thus achieving the devaluation of yen. Wall Street Journal expected that the inflation rate would make it less attractive for Japanese households to save and invest their money else where or simply use them to go on shopping. “Deutsche Bank said in a note Wednesday, spurring a “meaningful reallocation” of these deposits into offshore assets.” Therefore, Abe’s policy should have helped to vitalize the consumer sector of Japanese economy and at the same time increase its export to foreign countries.

However, Hankook Ilbo, a Korean newspaper, has published an article that Abe’s devaluation of yen is actually having a reverse effect on Japanese economy. According to the report published by Japanese Ministry of Finance in February 20th, 2013, exports decreased 9.4% compared to the previous month, while imports increased 8.2%. This resulted in 1.63 trillion yen deficit.

The newspaper analyzed that the main reason for this deficit is the rising prices for the energy imports due to the yen devaluation. The nation has been importing more of energy supplies such as LNG, oil, and naphtha, as it tried to diversify energy usage and reduce nuclear power following the Fukushima Nuclear Accident. According to Hankook Ilbo, “If Japanese firms fail to significantly recover from this deficit, Abenomics will be hit hard.”

In addition, many Japanese firms are showing their reluctance in raising wages for workers, which is very important for Abenomics to work in order to revive the real economy. They believe that devaluation alone will not simply rejuvenate the economy. Many Japanese companies have been outsourcing their factories overseas and it would be very hard to retrieve all those back to Japan in very short period.

Of course, it has only been several months, so it will be hard to tell whether Abe’s yen devaluation is doing well for the Japanese economy. But, I think that, from reading these articles, it would be better off for a Japanese economy to appreciate yen due to significant the increase in the energy import. The devaluation certainly is doing no good for Japanese economy and disturbing other export-driven economies such as Korea, Germany and etc.

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Free Trade vs. Protectionism

Satirical View of Protectionism

There are strong arguments from both opinions. However, I do think that an industry needs a protectionism in order to build up its capability to compete with international industries. There are many real world examples that support this idea of protectionism. Of course, it could be unfair for some of the countries that are trying to get in to the market, however, the country with inefficient, lack of technology on specific area will never get better just by initiating free trade with other countries, completely making the weak industry vulnerable to international siege of cheap… products.

There are many industries in East Asia that have benefited from protectionism. One of the most famous example would be South Korea. The country had set a quota, tariff and all methods of protectionism possible to grow one of the important industries. For example, the electronics industries have heavily benefited from the protectionism. From 1970-1990’s, the electronic companies such as Samsung or LG have had significant growth due to the protectionism. Thus, expanding economic growth within the country and lifting the standards of living of the South Korean people. If Korea did not use any kind of protectionism to bolster its core industries, they might be still suffering from poverty and low standards of living. This also includes Japanese, Taiwanese and other nation’s industries. These countries became wealthy by overcoming the lack of resources by protecting the important, lucrative industries.

It would be completely immoral for developed countries to impose and bully undeveloped countries to sign up for WTO and initiate free trade. These undeveloped countries will never have the chance to grow and develop their own industry and technology. It would be forcing a poor country to stay poor and never giving them a chance to have develop their own industry and raise the standards of living.

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Saving is a Good Habit, but also a Bad Habit

Japan’s $15 Trillion Not Enough to Make It a Buy by William Pesek: Click Here

Is saving a good habit? If you look at Japanese people, they save a lot. As a result of assiduous saving, Japanese households have about $15 trillion according to the Bloomberg commentary by William Pesek. Wow, $15 trillion dollars! It’s higher than United State’s GDP of $14.2 Trillion (2008). However, the author acerbically criticized that Japanese people’s habit of saving is actually harming the Japanese economy for several reasons.

As you see, the saving is considered as a leakage along with importing and taxing. Why is saving considered a leakage? It is because the money saved is not used in the economy or market for long period of time. It is like blocking a current of river by building a dam. Saving is necessary, however, excessive saving can result in deflation, which Japan is severely suffering from.

Although the Japanese households have $15 trillion, they do not use it. This is one of the major roots of Japan’s lost decades and current economic crisis. The news columnist William Pesek claims that Japanese people’s saving of consuming is causing the deflation because the market has lack of currency flowing through it. If an economy is compared to a human body, people’s lack of consuming can be compared to low blood pressure. There just aren’t any money to get the economy going. Due to low demands for almost all the goods and services in Japan, the suppliers has to lower the price of their product. And this causes deflation, which William Pesek considers it to be a big problem for Japanese economy. The market is just hamstrung by Japanese’ excessive saving.

Japanese government’s public debt of 200% (to GDP) has resulted from this excessive saving too. Because there is a big leakage (saving) in the market, the Japanese government has to borrow from banks or households and pour it in the market to make it working. If the government do not support the market, the economic crisis would have been more devastating. As a result of trying to pour the money into the market, the Japanese government’s 45% of its spending is from Japanese’ households lending. This has further accumulated the public debt of 200% (to Japanese GDP).

Why are Japanese people reluctant in spending? It is from the lack of confidence about the future. The Japanese government is to be ascribed to the blame. The government did not take aggressive measures to tackle the problem. This has resulted in Japanese people’s distrust toward the government. The government now has to take aggressive measures to tackle the economic depression and encourage the people to spend more.

In sum, saving is a necessary habit, however, it could also hurt the economy if this is done excessively, when no one is willing to buy anything and just save money. I think that the best solution for Japanese economy to rise again to for the Japanese people to spend more again. Just think. If Japanese people spends all of $15 trillion, the GDP will surpass the US GDP. 🙂 yay and Japan will have the top GDP in the world. I personally do not think that that much of spending is worth it :(. Yet, this will be the best solution to the economic crisis in Japan.

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Japan’s Victory Against Bluefin Tuna Ban – Negative Externality

Yahoo News: Click Here

Al Jazeera English: Click Here

Financial Times: Click Here

According to Yahoo News, Japanese fish dealers on Friday welcomed the rejection of a proposed trade ban on Atlantic bluefin tuna — a prized ingredient of sushi — while urging that existing quotas be more strictly enforced to protect the species from overfishing.

When I saw the news on NHK, the Japanese national television channel, it reported how Japanese people sighed with relief.

Japan consumes about 80% of bluefin tunas caught in the world, and this has created the problem of possibility of extinction of bluefin tuna. In fact, according to Financial Times,  scientists estimated that bluefin stocks have fallen by 75 per cent since the 1950s. Large fish now sell for tens of thousands of dollars.

Japan’s consumption of bluefin tuna had the negative externality of decrease in the number of bluefin tuna and the possible extinction of the tuna. This will be explained a lot better if you loot at a diagram.

As you see the Diagram, Japanese consumption of bluefin tuna is creating a negative externality of decrease in the number of the species and possible extinction of the species. The current consumption curve is on MPB which should be on MSB that reflects these negative externalities. Point(Q*,P*) is the optimum point where it is considered appropriate for the price and the quantity consumed for the bluefin tuna. The US and the European countries tried to ban the consumption of bluefin tuna in order to overcome this negative externality, but they were defeated by Japanese lobbyists and many bluefin tuna fans.

Personally, I am a great fan of tuna and sushi so I was grateful for what Japanese have done. But, I wasn’t that happy because I realized that there were these kinds of negative externalities associated with my lovely consumption of tunas 😦 I think that Japanese should increase the number of bluefin tunas by making a tuna farm. That way, it’ll increase the quantity the supply of tunas and decrease the price of it making it happy for the consumers like me 🙂 I’ve heard that it is hard to ‘cultivate’ or raise these big fish in a isolated pools, but I hope that Japanese fishery industries develop a way to ‘cultivate’ (I don’t know other apt vocabulary to replace this) them.

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Pollution in Kobe, Japan – Taxation, Subsidization, and Tradable Permits

Voice Thread Presentation: Click Here

Although Kobe, Japan is not on the list of world’s top 10 polluted cities, southern part of the city is heavily polluted.  Southern part of this city have over 15 factories producing ships, steel, electronics and cars. It is surely a heart of Kobe’s economy and finance, however, it is causing a negative externality of air pollution.

Factories are concentrated on the southern part of Kobe, Japan.

These heavily-industrial factories release unknown chemicals into the air and pollutes the city severely. As a result of pollution, the inhabitants living around the area can suffer from several sever health problems such as respiratory problem, cancer, nausea and etc.

Then, how could we possible solve this problem? There are three solutions to solve the problem. They are taxation, subsidization, and tradable permits.

First solution to Kobe’s pollution is taxation. As you see in the graph, the pollution in Kobe is the negative externality caused by manufacturing of ships, electronics, and so on. Originally, this was not considered as a ‘cost’ to society, so this cost was not reflected. So the supply curve is on MPC initially, however, we can tax the producers to move the quantity supplied back to the optimum point of Q. The supply curve will go up to the curve of MSC which rightfully reflects the social cost of pollution. This way, the government can expect the effect of reduced pollution in the city of Kobe.

However, there is one draw back to this solution. The consumers would have to buy the product at much higher price from P1 to P2 compared to before.

The second solution is to subsidize firms that are employing more environmentally-friendly method of manufacturing their products or the firms that are developing eco-friendly technology. By subsidizing these kind of firms, the level of pollution in Kobe could decrease significantly. As you see in the graph, by subsidizing these firms, the price of these firm’s products will decrease from P to P1, and the quantity demanded will increase from Q to Q optimum. Increased demand of these products will increase the positive externality of reduced pollution in Kobe. However, this method is uncertain because we cannot quantify how much positive externality it will cause.

The last solution is issuing tradable permits. Tradable permits are permits issued by governments allowing how much of pollution firms can create. If a firm exceeds the pollution rate it is suppose to create, the firm much buy a tradable permit from other firms. If a firm succeeds in reducing pollution and they have extra permits, these firms can sell the leftover permits to other firms that exceeded the pollution level. By issuing tradable permits, we can lower the pollution level significantly. Also, it encourages the firms to be efficient and lower the pollution level. If they lower the pollution level, they can sell their extra permits and gain profit. Many countries are told to be using this system to reduce pollution.

In conclusion, taxation, subsidization, and tradable permits are possible solutions to the pollution in Kobe, Japan. The local government should now take action to reduce pollution in Kobe and make it a pollution-free city.

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Advice for JAL

ja-704j-japan-airlines-jal-boeing-777-246-er

Just like British Airline, Japan Airline is in a big mess of deficit. Due to global economic recession, the demand for high service, high price seats went down as well as Japan Airline’s profit went down. Here are some of my advice for JAL:

  1. They should cut off high price seats such as business class and 1st class seats. Due to global economic recession, the demand for those seats have went down. Conversely, the demand for lower price seats such as economic seats went up.
  2. They should lower the price as much as possible. As the demand for high price seats went down, Japan Airline must make the seats available for a low price in order to ‘survive.’
  3. They should lower the labor cost. This might lower the quality of airline service, however, it is inevitable during the recession.
  4. They should get rid of unprofitable air-routes. By getting of those unprofitable, money-eating routes, it will significantly help Japan Airline financially. Instead, they should look for cheaper, but effective routes.

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Opinion: Japan Recruits Foreign Nurses to Care for Elderly

800px-Flag_of_Japan.svg

Click Here: News Article

Just like U.K., Japan is recruiting foreign nurses to solve the problem of scarcity of nursing workforce. This is a typical problem for many developed countries with large old population.

In my opinion,  Japanese government’s decision was somewhat hasty. Although there are influx of international population in Japan, Japan is still considered to be ‘xenophobic.’ The recruitment of foreign nurses would surely stir some problems such as discrimination. Even the response of Japan Nursing Association was somewhat xenophobic. This problem would not be apparent initially, however, it could be aggravated to diplomatic problem between Japan and the foreign country.

Other than problems of Japanese’ detest of foreign nurses, there is another problem with this decision. Most of the recruitment of foreign nurses were made in developing countries. If Japan recruits all these medical workforce, developing countries might have shortage of medical resource. It would be snatching away doctors and nurses from developing countries which would need the most medical support.

About developing robots to nurse the old population, I think that it is somewhat inhumane. I think that old people should be nursed through social interaction, not with mechanical interaction.

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