Research Proposal: Compare South Korea and Japan

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Japan and South Korea

Japan

Japan is an island nation in East Asia (Duus 2009). It is located in the North Pacific Ocean on the coast of the Asian continent. Japan is made up of the main islands of Honshu, Hokkado, Kyushu and Shikoku and many smaller islands. It is called Nihon or Nippon by its people. This means "origin of the sun." It is also referred to as "the land o the rising sun. Tokyo is its capital and largest city (Duus).

An Isolated Nation

Japan was ruled by an emperor from the 7th century (Duus 2009). In the 12th century, military rulers, called shoguns, surfaced and shared power with the emperor for more than six centuries. From the 17th century, a powerful military government sealed the country's borders to foreigners. In the 19th century, it prospered economically. A strong centralized ruler separated it from the rest of the world. Hence, it could not benefit from development and progress from outside. It was way behind Western nations in technology and military might. During the rule of a Meji emperor from 1868-1912, Japan set up a crash program of modernization and industrialization. It embarked into a colonial expansion into Korea, China and other parts of Asia. By the early 20th century, it rose to become a major world power (Duus).

Japan was one of the Axis powers, which fought the Allies during World War II from 1939 to 1945 (Duus 2009). By the end of the War, most of Japan's industries, transportations, and urban structures were eradicated. The War also took its colonial holdings. The Allies occupied Japan and ran its government. The emperor became a symbolic head of state in a constitutional monarchy under a revised constitution (Duus).

A Developed Nation, the World's Second Biggest Economy

When the Allies left Japan in 1952, it was considered a less developed country with a per capita consumption of only a fifth of that of the United States (Asianinfo 2009). In

the succeeding 20 years, it rose to a developed status during the post-war era. And in

1968, its economy ranked as the world's second biggest, second only to that of the United

States (Asianinfo).

The urban population almost doubled in size between 1950 and 1970 and increased the demand for services (Asianinfo 2009). Average exports in the 60s went up 18.4% in the 60s. These developments changed Japan's industrial structure. Its traditionally agricultural and light manufacturing bases shifted to heavy industry and services. Main industries were iron and steel, ship-building, machine tools, motor vehicles, and electronics. Even higher growth rates could have been predicted for the 70s if not for a recession, which deterred growth expectations. A double-digit inflation, the Middle East oil crisis and other factors reduced the volume of private investment. These reduced economic growth from 10% before 1974 to an average of 3.6% after 1974 to 1979. The growth level went up slightly by 4.4% in the 80s until the surfacing of the "bubble economy." Despite the pitfalls, however, Japan's major export industries remained strong and competitive because of its cost-cutting and increasing efficiency policy. It decreased energy demands and by manufacturing lighter and more economical vehicles, Japan even improved its global position. The second oil crisis in 1979 moved Japan's emphasis from heavy industry to new fields, which reaped rewards. These new fields are computer semiconductors and other technology and information-related industries. The shift spurred rapid growth (Asianinfo).

The Bubble Economy

After the 1985 Plaza accord, the value of the yen soared to thrice its value in 1971 (Asianinfo 2009). Increased prices of its exports reduced global competitiveness. Domestically, corporate investment went up steeply in 1988 and 1989. Land value prices doubled and there was a 180% rise in the Tokyo Nikkei stock market index. The government tightened its monetary policies to contain the rise in the value of assets, like land. But high interest rates pushed stock prices down. The stock market fell by 38% at the end of 1990 and decimating $2.07 trillion in value. Crashing land prices plunged financial institutions into deep debts or bankruptcy. Some survived by limiting the supply of capital to private businesses through loans. The recession broadened in October 1993 and recovery since then was slow (Asianinfo).

The Industrial Sector

Japan's slow growth in the late 90s drew doubts on its capability to remain competitive (Asianinfo 2009). Although the U.S. retained leadership in the information technology industry, technological innovation enabled Japan to retain its marketing might. Its leadership in the semiconductor and automobile industries stayed. The yen was also a rallying point. Its steep rise led Japanese companies in the major import industries to bring production outside of the country. Assembly plants were set up in China, Thailand and Malaysia for the manufacture of electrical products, such as TV, VCRs and refrigerators. This would retain high quality in workmanship but reduce labor costs in those countries where labor is cheap. Industrial and market globalization increased the export of components and capital financing and importation of finished good. Overseas production by Japanese manufacturers constitutes 10% of total production. It is swiftly rising although comparatively lower than the shares of the U.S. And Germany at 27% and 17%, respectively (Asianinfo).

Postwar Economy

This was characterized by a 15-year period of high growth and prosperity in the mid 50s (Asianinfo 2009). High rates of personal and private-sector facilities investment, strong labor force work ethic, sufficient supply of cheap oil, innovative technology, and effective government support of private-sector industries accounted for this. Japan took advantage of the incentives under the principles of free trade made available during the period by the International Monetary Fund and te General Agreement on Tariffs and Trade. From the mid-60s, it achieved a balance surplus every year, except during the oil crisis of 1973. With net external assets of $129.9 billion, Japan surpassed the United Kingdom as world leader, next only to the U.S. Records make it clear that Japan's economic growth owes to its exports and private-sector facilities investments (Asianinfo).

A review of Japan's economic history shows that its prolonged economic troubles are attributable to its 50-year postwar economic system (Asianinfo 2009). Taking this into serious consideration, the Japanese government has been taking earnest steps in preventing another economic bubble and reforms to accommodate the demands of industrial globalization. It adopted measures to stabilize the nation's financial system and refresh the sluggish economy. Some of them began in 1998, following the filing of bankruptcy by some financial institutions. Another problem is the increasing number of elderly. This means higher demands for social security, reduced workforce and increased tax burden for the labor force. And a reduced workforce can also stunt economic growth (Asian info).

Chief economist Jesper Koll of Merrill Lynch Japan predicted a 1.5-2% growth for Japan's economy early in the decade (Kyodo 2000). He foresaw better performance in the private sector and renewed investments by Japanese firms in foreign countries. But he also warned about policy mistakes, such as high interest rate or tightening fiscal policy. On the whole, he forecast economic growth as more Japanese technology companies compete globally. Toshiba Corporation, Hitachi Ltd. And Sony Corporation are competitors to U.S. firms in the information technology and technology media fields. His opinion was that more capital infusion into Japan's financial system and more substantial savings could prop up overseas investments by Japanese firms, especially in the technology and basic industrial sectors. He saw the dollar trading between 115 and 120 yen instead of only 85-90. Economist Bruce Steinberg, also at Merrill Lynch and Company, saw the U.S. dollar defeating the yen, though (Kyodo).

A Review of Contemporary Japanese Economy

Despite some serious economic and financial straits, the Japanese economy manages to stay as the second largest in the world (Yamori & Jinushi 2006). It means that it inevitably affects the world, especially Asian countries. Japan's 1990 woes are of international value for at least two reasons. One is that knowing and understanding what led to Japan's woes would help other countries avoid them. The other is the lesson other countries' central bankers can derive from Japan's monetary policy in prolonged deflation. A review of 1990 woes showed that banks continued to lend huge amounts to real estate and construction companies in the early 90s. They did this despite the havoc wreaked on them by the bubble economy. In the late 90s, banks decreased loans granted to financially-troubled borrowers (Yamori & Jinushi).

In 1994, Japan's per capita GDP was $37,618 (Asianinfo 2009). It made Japan the top-ranking OECD country. The figure suggested that the average Japanese then enjoyed a comfortable standard of living. But an EPA survey conducted in November 1994 showed that Tokyo's commodity prices were 52% higher than those in New York and 50% of those in London. The figures meant that the Japanese consumer had a relatively low purchasing power. Residential land prices in Japan at the time, especially in big cities, were so steep that mortgages and rental payments were a burden to… [END OF PREVIEW]

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Compare South Korea and Japan.  (2009, April 30).  Retrieved July 21, 2019, from https://www.essaytown.com/subjects/paper/compare-south-korea-japan/57723

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"Compare South Korea and Japan."  Essaytown.com.  April 30, 2009.  Accessed July 21, 2019.
https://www.essaytown.com/subjects/paper/compare-south-korea-japan/57723.