Japan's Economy

Introduction

        Japan, a large producer with the advanced technology in the industries sector, a country with a strong work ethics and mastery of high technology built a technologically advanced economy. They have a very close interlocking structures like manufactures, suppliers and distributors which is known as Kieretsu. Traditionally, the older people who have been in the company for a long time usually get higher salary paid which is also as a reward for their loyalty. This is because for the substantial portion of the urban labour force, they have guaranteed the lifetime employment. In the industrial sector, they are highly depending on the imported fuels and raw materials as well as import 60% of the food on the caloric basis as the tiny agricultural sector is highly supported and protected. Japan also maintain the world’s largest fishing fleets for about 15% globally. For the three decades, Japan had a generally good economic growth. However, although Japan did not exposed to the housing problem and credit crunch, Japan faced recession in the late 2008 because of the sharp decrease in business investment and an asset price bubble. To help the economic recovery, the Government increased stimulus spending by proposing the boost of the export through free-trade agreements and open up the agriculture and services sectors to a greater foreign competition.

        The purpose of this assignment is to discuss the economy of Japan which can be examined through the real GDP, real GDP annual growth rate, real GDP per capita, unemployment rate and inflation rate over the last decade which is from 2005 to 2014. In this research, the discussion will include the causes of the downturn of the Japan’s economy and the policies proposed by the Government to take action for improving the economic as well as to achieve full employment, stable price and economic growth.

Production Output Performance Analysis

Real Gross Domestic Product

        Real gross domestic product is the macroeconomic measure for the market value of the goods and services produced in the given year which valued at constant prices as to fix a variable to easily make the comparison. By measuring the price level, GDP deflator is used which is the average prices for the goods and services in the current year and expressed as percentage of the base year prices. The formula of the real GDP is as below:

Real GDP = (Nominal GDP / GDP deflator) x 100

The economists often use this as to compare the performance of an economy over many years as the price level is kept constant. Besides, real GDP also determines the size of an economy as well as the level of the production activities. Time-series graph 1 below shows the graph for the real GDP constant prices.

Time-series graph 1:

[pic 1]

Based on the graph, there was a steadily increase in real GDP before late 2008 as almost half of the Japan’s GDP accounted and depended on the net exports. However, the real GDP decrease sharply until the late 2009 due to the global financial crisis and export bubble burst which officially slipped into recession. Despite the Japanese believed that yen stayed low can lead to keep the global demand strong, the foreign demand collapsed, Japan was hurt by the weak net export and the corporations were unwillingly to spend and invest the money in the middle of worsening economic slowdown. Besides, this was also affect Japan’s high value and export product like cars and electronics which were the first that the people stop buying. Firms as well were temporarily closed one by one to clear the remaining stocks. After implementing some policies, the GDP was rising and the recovery was relatively good even though there were some fluctuations on it.