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Economic development in Japan

Introduction

Japan's rapid transformation from a less developed to a developed nation following

World War II is evidence that they paid attention to the areas that required reform. Japan had

achieved an average annual economic growth rate of 8% in roughly 20 years. A strong work

ethic served as the motivation for this growth. Increased savings, which allowed the private

sector to undertake investment projects, were another factor that quickened the growth rate.

Technology and the availability of cheap oil drove industrial development. Japanese innovation

led to the production of high-quality goods that were exported to other countries and found larger

markets. The robust economic expansion was also facilitated by government regulation of the

private sector.

The Japanese economy continued to grow quickly throughout the 1960s, 1970s, and

1980s, and new industries appeared. The economy shifted during this time away from agriculture

and toward heavy industries like the construction of ships, automobiles, machine tools, and other

items. A significant portion of Japan's income came from exports as a result of this industrial

expansion. The export market and the rate of economic growth were greatly impacted by the

strong yen's appreciation in the 1980s. The purpose of this paper is to discuss economic

development in Japan and the factors that have contributed to its growth.

Analysis

According to the article by CNN, Japan is experiencing economic growth and the

research shows that this has been on the increase due to the increase in exports. The article

argues that Japan’s economy grew much faster in the months of April to June and this has been
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necessitated by the increase in auto exports and the presence of tourist arrivals thus boosting the

local economy (Reuters, 2023). This is important news since the global stage has been recently

affected by the effects of the covid pandemic and the loss of revenue due to high rates of job

losses among the population.

Additionally, the article is important in my research because it will help me understand

the economic development of Japan and what they have been able to achieve over the years. It

will also help me to understand the impact of economy growth in the country and what they have

been able to achieve after the covid pandemic. Even though the issue of global recession has

been mentioned, I found this article to be insightful because it has given the figures and how

Japan has been able to overcome this especially with the recorded annualized growth that they

country has experienced this year.

Additionally, the article from East Asia Forum talks about Japan’s new vision for

economic growth. For instance, the article talks about the plans that have been put to ensure that

Japan achieves its economic objectives and increase investment for its people. The investments

that have been mentioned involve setting up green and digital transformations, innovation and

science that are meant to spur economic growth hence benefit the people of Japan and the

country in general (Okina, 2023).

Besides that, the article argues that there is need to improve productivity and this can be

achieved through smooth labor mobility that should be directed to other areas of the economy so

that the economy can be improved. This article will be important for my research because it

helps me understand the economic development of Japan and what they have been able to

improve on over the years. It will also help me understand the measures and steps that they have
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taken to build on economic success that they are currently enjoying in various sectors of their

economy. The country is also experiencing changes in the labor market and this is one of sectors

that contributes to economic growth through sustainable measures that improve on employment

opportunities.

Discussion

The concept of international development of the economy is important because it helps us

to understand some of the measures that have been taken by a country to achieve their objectives.

The topic on economic development is something that I can connect with from the articles that I

have chosen. For instance, Japan has experienced growth in terms of economy due to the

measures that they have put in place to achieve this (Grinberg, 2022). The recent increase in

exports has also contributed to this economic growth and Japan has also ensured that this is

sustainable in the long-term.

However, the concept of economic developing while relying on exports also has its

challenges that have been highlighted in our class readings. This is because it leads to increased

dependency on foreign products. Dependence on foreign products leaves a country susceptible to

economic shocks, such as fluctuations in the exchange rates. Furthermore, the export-led strategy

will promote uneven resource distribution. In most instances, the wealthy stand to gain

substantially compared to the less wealthy (Kollie, 2020). For example, the strategy was widely

adopted in Japan, increasing the gap between the less privileged and the privileged.

On the other hand, export-led approach shields a country from external shocks in

different ways. Firstly, the export-centered approach positions the country strategically regarding

matters of foreign exchange. A country earns income through exports, which are usually in a
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foreign currency. As such, their foreign reserves continue to expand such that future market

fluctuations would not significantly impact the economy (Grinberg, 2022). Furthermore, export

income is sometimes channeled into other sections, such as using the income to purchase

essential commodities from other countries. This would have an impact on increasing economic

growth just the same way Japan has experienced over the recent years.

Evidently, the country is doing well in business by looking at the manner in which it has

achieved economic success over the last few years. Focusing on exports increases the capacity of

a country to do business since it leads to more revenue generated internally through reserves. The

utilization of exports increased chances of developing steady economic growth. In addition, it is

a god environment for doing business since one will gain other pertinent factors, such as

technology and skills, which they can use to develop their domestic production and firms (Okina,

2023).

The approach that has been taken by Japan over the years exposes the country to global

competition, which presents a higher possibility of attracting foreign direct investment. Once

foreign investors are interested in the country, other systems, such as job opportunities and

management skills, will benefit the country. In the end, this forms a good ground for doing

business in the country due to the opportunities that are presented in Japan. Countries

predominantly engage in exchanging goods and commodities since it presents some benefits. It

fosters good relationships with trading countries, and it generates revenue. Therefore, Japan is a

country that has the ability to improve on business growth because it is engaged in doing

business with other countries.

Investment and Practitioners

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The environment in a country plays a significant role towards the success of conducting

business. Japan as a country has a favorable business environment and this has been associated

with the success enjoyed. The advantage of doing business in Japan is the presence of highly

educated workforce. As such, it is an advantage because it is easier to have skilled labor force

hence beneficial when you want to set up a business in the country.

In addition, there is government support in Japan hence an advantage since the business

environment will be favorable. The Japanese government has provided a favorable business

environment through provision of regulations and laws that make it easy to do business hence an

advantage to the investors (Suengh, 2014). For instance, the government provides subsidies and

tax breaks when doing business. This is important in Japan because it has contributed to

economic development and improving on the overall GDP for the country.

Besides that, the presence of diverse markets in Japan is an advantage because the

country has a diverse and large consumer market. As such, it is an advantage because businesses

would thrive because of the ability to reach out to new potential clients. The other advantage of

is low cost of setting up businesses. Japan has a low business cost hence making it an attractive

place where businesses would enjoy low overhead costs.

However, there are several disadvantages of doing business in Japan. There is high labor

costs in Japan and this can be a determinant in influencing business opportunities in the country.

The other disadvantage is there is limited access to foreign markets. For instance, the foreign

companies can have a difficult time due to the available restrictions hence making it difficult for

doing business. Besides that, Japan has high taxes especially for the corporate businesses. This

can have an impact on businesses since it can reduce on the profits generated and making it more
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expensive to do business in the country. Cultural differences can also create difficulties for the

foreign companies hence making it challenging to do business in the country.

The foreign direct investment trends in Japan have experienced steady increase since the

year 2010. This is because of a business environment that is conducive hence attracting foreign

investors. The biggest source of FDI in the country of Japan is the United States because it

accounts for 20% of the total FDI that they receive (Schindler, 2008). The flow comes from

different industries such as real estate, manufacturing, insurance, and finance hence contributing

to steady growth.

Factors contributing to economic growth

Japan used to be a traditional nation. Following World War II, Japan established a

democratic system of government, which led to the establishment of a pro-capitalist economy.

Japan would not be making the same mistakes as other countries that had to learn modernization

the hard way because it was a new modernization. The Japanese government quickly realized

that a strong industrial base was necessary for the economy to flourish after learning from the

various economies. As such, the Japanese government was prepared to invest in sectors such as

manufacturing, agro-based industries, and heavy engineering. The significance of consumer

goods was also recognized by the Japanese government. As a result, it also encouraged the

development of businesses involved in the production of consumer goods, particularly electrical

and electronic appliances meant for home use. The Japanese economy was firmly established by

this industry diversification and rapid industrial growth, and it quickly became one of the

strongest in the world.

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Additionally, the Japanese labor force has made a substantial contribution to the

expansion of the country's economy. The Japanese government realized early on that developing

a skilled labor force was crucial to fostering economic growth. The government had to make

significant investments in the education sector to achieve this. Although the investment did not

yield rapid returns at first, it turned out to be the most sustainable in the long run. Moreover, a

consistent performance was generated by this investment.

The government did not need to rely on any foreign investment because there was a

skilled labor force available. In the long run, the skilled labor force proved to be very

advantageous, and Japan rose to prominence as a global leader in information technology,

software, and technology. Japan was among the first countries to embrace and use digitization

due to the country's easy access to skilled labor. There was a large pool of semi-skilled labor in

Japan as well. This was mostly made up of laborers from the agricultural sector, who also moved

quickly to become skilled workers in the industrial sector.

In exchange for daily wages, agricultural laborers in Japan began transitioning to

industrial labor in the 1960s as the country became more industrialized. Despite the fact that

industrial laborers' wages increased dramatically during this period, businesses always kept their

good relations with the unions to guarantee that the pay increases never had an adverse effect on

productivity. The companies' profitability remained unaffected even after they paid high salaries

and wages. The union-company relationship contributed to the growth of certain industries.

Moreover, the country has taken an investment approach that has contributed to

economic development. For instance, people are encouraged to invest and save by the Japanese

economy. The Japanese economy is heavily dependent on savings, in contrast to many other
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advanced nations' economies. Increasing rates of investment are frequently closely correlated

with savings. More savings translate into more opportunities for the banking industry to invest in

the business sector. More industrial sector investment translates into more job opportunities for

Japan's skilled labor force. Consequently, this will stimulate the economy's tertiary sector. The

tertiary sector of the economy is frequently thought to have the greatest potential for revenue

generation.

Furthermore, there is less likelihood of capital waste because Japanese people save more.

Additionally, there is a decrease in consumer waste of any kind, which could be harmful to the

economy and cause inflation. Poor credit and bank loan write-offs are two things that are less

common in an economy where consumers prefer to save money. Thus, the propensity to save

also contributed to bolstering the Japanese economy's foundation.

Japan saw a rise in small and medium-sized industries following World War II. These

were self-sufficient industries, but soon businesspeople realized that they could create stronger

industries by working together. Small and medium-sized businesses were thus combined to

create larger entities. As a result, each unit's productivity increased. The business owners found

that doing this would end up enhancing the earnings hence contributing to the creation of

additional jobs. As a result, Japan's industries were enhanced by the mergers, acquisitions, and

consolidations of smaller units to form larger units. Over time, it contributed to the expansion of

the Japanese economy.

As a result, following World War II, the Japanese economy experienced significant

changes. Nonetheless, the Japanese government and people's proactive efforts are what have

allowed it to grow into one of the world's strongest economies. Japan's transformation from one
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of the most advanced economies in the world to one that was utterly destroyed during World

War II was made possible in large part by the growth of a skilled labor force. As a result,

economic policies like the creation of a skilled labor force are strategically implemented to drive

the growth of the Japanese economy.

References

Grinberg, N. (2022). From populism to neoliberalism: The political economy of Latin American

import-substitution industrialization: Argentina, Brazil, Mexico and Colombia in

comparative perspective. Latin American Perspectives, 183-206. Retrieved from

https://journals.sagepub.com/doi/pdf/10.1177/0094582X211063503

Kollie, G. B. (2020). Export-led growth hypothesis in ECOWAS: A panel data analysis. African

Journal of Economic Review, 258-275. Retrieved from

https://www.ajol.info/index.php/ajer/article/view/197214/186060

Okina, Y. (2023). Japan’s new vision for economic growth. Hong Kong: East Asia Forum.

Reuters. (2023). Japan’s economic growth beats forecasts as exports zoom. Chicago: CNN.