Japan - Country Analysis Paper

3869 Words May 20th, 2012 16 Pages
An Analysis on the Country of Japan

Introduction: Japan, a relatively small nation in size, located in Eastern Asia between the North Pacific Ocean and the Sea of Japan boasts a population of about 127,368,088 people; 10th most populated nation. It is quite hard to imagine how a country about the size of the state of California could have been positioned and was predicted to become the largest, most powerful economy in the world. Japan’s economy, in the years following World War II can be described as nothing short of a miracle. For three decades, the real GDP of the country grew at an unperceived rate: a 10% average in the 1960’s, a 5% average in the 1970’s, and a 4% average in the 1980’s (CIA World fact book,
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However, the economy contracted again in 2011 as the massive 9.0 magnitude earthquake in March disrupted many business operations including manufacturing. Electricity supplies remain tight because Japan has temporarily shut down almost all of its nuclear power plants after the Fukushima Daiichi nuclear reactors were crippled by the earthquake and resulting tsunami. Estimates of the direct costs of the damage - rebuilding homes, factories, and infrastructure - range from $235 billion to $310 billion, and GDP declined almost 0.5% in 2011. Furthermore, there is doubt to whether government stimulus will have a lasting effect in helping the economy recover in the long run. First of all, there is uncertainty in the outlook for exports of Japanese products which is due largely in part to the strong yen against other currencies; encouraging imports of products to grow more quickly than exports. In addition, heavy reliance of the Japanese market on exports leaves them in a risky position as they have neglected the downward pressures created with domestic demand being extremely low. This situation is only worsened with unemployment in Japan continuing to rise and decreasing salaries. As a Canadian investor, I would be extremely concerned with Japan’s current economy situation and would be cautious in investment. First of all, one would be aware of the strong yen which translates to a decreased profit for Canadian producers. Secondly, there is the fact