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What Factors Affect The Economy Of Japan

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1. A Brief Introduction Japan was a country that defied all odds and became a world power after losing a devastating war. In the 30 years after World War II the Japanese economy grew at an incredible rate, so much so in fact that Japan became the second largest economy in the world. Japan managed to successfully enact an economic system wholly different than that of the United States and because of it Japan experienced incredibly rapid growth over a period of roughly 30 years. During that period of financial power, exports were booming, the standard of living was rising, and technology was thriving. This period of growth however, did not last; in the late 1980s the bubble burst. In 1991 and again in 1997, Japan’s stock index, the …show more content…

The current outlook on the future of Japan is grim; Japan needs to alter their ways in order to get back on track and continue being a major economic power. Source: (Vogel, 2006)

2. A Unique Japan 2.1 Coordinated Market Economy A key concept embedded in the Japanese model (prior to 1990) is keiretsu. Japan had a coordinated market economy rather than a liberal market economy like the U.S. (Table I). This essentially means that Japan “fostered long-term cooperative relationships between firms and labor, between firms and banks, and between different firms.” (Vogel, 2006) This network of relationships, called a keiretsu, proved stable, with the bureaucracy protecting industry from international competition and maintaining many aspects of the private sector. The bureaucracy played a large role in Japanese economics. Some claim that “Japan’s elite bureaucrats were too powerful and too inclined to meddle in markets,” thus factoring into the economic crisis facing Japan today (Vogel, 2006). 2.2 Long-term Employment
In Japan, long-term employment was the norm. That is, workers would remain loyal to the corporation they worked for, and unlike in the United States, very well might work for the same company their entire life. This gave corporations an incentive to invest time in their workers and thus foster their loyalty. These long-term

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