The role of technology in the trade sector has benefited the Japan economy. It has boosted the amount of trade as the movement of goods has become easier. Technology such as refrigeration and electronic tagging has made transport and inventory control faster and more efficient. This has improved Japan’s ability to trade goods back and forth internationally, which has helped Japan regain its previous power.
The deregulation of financial markets worldwide has impacted on the amount of trade within the Japanese economy beneficially. It has allowed the easier access to foreign currencies, which facilitates a higher flow of goods between countries, by relaxing laws that severely prevented foreign buying of currency and floating the yen. These drivers have helped boost Japan’s trade, helping it recover from its recession.
Finance and Foreign Direct Investment (FDI) has increased as a direct result of globalisation. FDI is the movement of long-term finances, for the purpose of buying companies or firms. Recently, due to the recession Japan has faced, there has been a downturn of the inflow of FDI however in Figure 2, it shows a significant amount of FDI incoming, especially in 1999.
TNCs have had a beneficial impact upon the amount of FDI into Japan. They are powerful and often invest in other countries that they believe are safe investments.
Technology has allowed finances to be traded and communication to be near to instantaneous. This has increased dramatically the amount of FDI into Japan. The deregulation of the financial market has also had a direct impact on the Japanese economy’s finance and FDI flows. It has allowed easier access for foreign companies to gain finance and acquire a loan.
The role of the Government has been the main contributor to the increase in FDI’s in Japan. The Government has taken a number of steps to promote FDI into Japan. The Government recognised early in the 1990’s that FDI would contribute to the reform of the Japanese economy. It would help enhance its vitality, create new businesses, reduce the disparities between international and domestic prices, and encourage import expansion. Through introduction of the new technology, this would increase management’s know-how and generate various kinds of competition among domestic and foreign firms. In 1992 the Japanese government promoted FDI in five ways. Firstly, the Foreign Exchange and Foreign Trade Control Law (referred to as the Foreign Exchange Law FEL) was revised to relax procedures for direct investment in Japan. Secondly, low-interest loan programs provided by the Japanese Development Bank(JDB) and Japan External Trade Organization’s (JETRO) foreign investment-related information services were enhanced. Thirdly, the Law on Extraordinary Measures for the Promotion of Imports and the Facilitation of Inward Investment (referred to as the Import and Inward Investment Promotion Law) was enacted to provide foreign investors with tax incentives and credit guarantees. Fourthly, the Foreign Investment in Japan Development Corporation (FIND) was established to support foreign-affiliated companies, and lastly, the Japan Investment Council was set up to help promote FDI. This has increased the amount of FDI into Japan notably, which has helped make Japan the second strongest economy in the world.
The impact of globalisation upon business and industries in Japan has been mixed. It has redefined the way business operates, its structure and strategies. In particular, trade liberalisation has allowed businesses to enter and compete, forcing businesses to become more efficient. The introduction of new technologies has also meant that businesses must adopt these technologies to remain internationally competitive. Japan has for the past decade been setting the standard for world’s best practice in business strategies and operations. This is evident with America’s adoption of many strategies such as Just In Time inventory and Total Quality Management. However in recent years the large economies have caught up to Japan and Japan has been forced to change their systems.
Globalisation has had a positive impact upon consumers. Due to the advertising and influential powers of TNCs in Japan, tastes have changed and broadened. TNCs are also providing goods and jobs to the population. For example 61.8% of the employed are working in tertiary sector, which is dominated by large TNC’s. The government has prevented dumping of goods into Japan, and promoted trade of satisfactory goods, this is evident in Japan’s rice industry. Japanese consumers as a whole pride themselves on the purity of their Japanese rice and the government helps to subsidise these costs. Trade liberalisation has provided a wider range of goods for consumers and at lower prices as well. The increases in technology of computing have impacted upon consumers considerably. Computers and electronics are an important export for Japan and so they have helped to improve the standard of living for the Japanese people with a literacy level of 99% and death rate of 0.855%. Globalisation has had an excellent impact upon consumers in terms of variety of goods and prices.
The Japanese Government’s role and policies have changed to a high degree due to the impact of globalisation however it has been for the better. Due to Japan’s largely influential TNCs the government has had to take them into consideration when developing policies. Japan also believes that the East Asian Region is a growing economic region and that rather than being competitors, they are only going to help contribute to Japan’s economic growth and development. The Government has decided to pursue FTA’s with the East Asian Region primarily, with countries such as China, RSK, and Taiwan. This is evident with the current trade meeting with Japan and RSK, and has resulted in a “Joint Study Group”. Also with the increase in technology, the Japanese government has been made to increase its standings on intellectual property and patents. They created the Trilateral Web Site with the US and Europe, which helps facilitate international patents.
Arguably the most dramatic effect of globalisation on the Japanese economy is the impact upon Japan’s labour market. Japan’s labour market is characterised and renowned for its lifetime employment and system of seniority as priority. Payments are based upon seniority not performance, and there is intense loyalty within the companies. Whilst previously this was the best practice in producing standard goods, this system has now become obsolete. Many economists have commented on this as the major factor in Japan’s economic recession. TNCs are now changing their payment systems to more performance based bonuses and wages. For example Toshiba are one of the first companies in Japan to introduce a western style of payments into a few of its branches.
The role of the government has impacted the labour market of Japan. The government is very strict in protecting it’s rice industry and so provides jobs for the majority of Japan. As previously mentioned, international businesses have adopted the best attributes of Japanese business. This has created a hybrid and more efficient business strategy.
Due to trade liberalisation there is more access to compete against Japanese businesses and so now Japan must open its doors and change some of its strategies. Currently, technology is rarely employed in Japan. People focused jobs are favoured rather than implementing technology which would make employees obsolete. Furthermore, globalisation has meant that businesses have access to cheap foreign labour such as in China or Indonesia, whilst Japan’s labour is costly. This has led to a loss in jobs in Japan and a record high unemployment rate of 5.5%. Globalisation has had a negative impact on Japan’s labour market, however it also poses the greatest opportunities for Japan to recover, as it can source its labour from externally, and if it can become more efficient and trade more it will boost its growth.
Globalisation has affected Japan’s economic growth and development in several ways. Japan has suffered from recession and deflation of –0.3%, rising unemployment of 5.5%, reduced GDP during the past few year of 0.4 in 2001 and 0.2 during 2002. However, Japan has had a recent growth in GDP of 2%, which could signify a general trend upwards. The effect of globalisation on economic growth has been that it has exposed the Japanese economy to more efficient businesses and has not changed. Japan’s domestic economy, in particular the financial market has held the economy back with non-performing loans. Globalisation in this instance does not help as it makes it harder to compete and restructure the economy. Economic growth has slowed with the indication from the Real GDP growth as shown in Figure 3.
Figure 3
Source: Department of Foreign Affairs and Trade Australia.
On the other hand, globalisation helped Japan achieve its rapid economic growth, and poses as the greatest support in the return of the Japanese economy’s strength.
As a result of globalisation, the literacy levels in Japan are high at 99% and the general living standards of the Japanese are very high, with an average life expectancy of 80.93 years, an infant mortality rate of 0.33% and a death rate of 0.855%. The level of income inequality or distribution of family income is relatively equal, at a Gini Index of 24.9, where 100 represents perfect inequality and 0 perfect equality. Compared to USA’s index of 40.8, Japan has a quite equal distribution of income.
But there are several social problems in Japan, such as a severely aging population, and obvious sexual inequality.
Globalisation has exacerbated the impact on the environment. The Japanese and global environment is being damaged due to Japan’s usage of resources. For example it uses 5.29 million barrels of oil each day. The main environmental issues Japan faces are that the air pollution from power plant emissions results in acid rain, the acidification of lakes and reservoirs degrading water quality and threatening aquatic life, and the fact that Japan is one of the largest consumers of fish and tropical timber, contributing to the depletion of these resources in Asia and elsewhere. In response to the global push towards sustainable living the Japanese Government has introduced various policies, the main policy being the “Basic Plan for Establishing a Recycling-Based Society” which outlines various laws that have been enacted and planned for the future.
It is evident that globalisation has had some severe impacts and implications upon the Japanese economy. However the impact upon trade, finance, businesses, consumers, and Government have all been positive. Whilst globalisation has negatively impacted upon the Japanese labour market and also economic growth, it is also a catalyst for Japan to regain its former position and economic growth. However, economic development in Japan has still not been affected much by globalisation but rather has remained steady. Japan’s trade has been boosted because of globalisation, which has helped Japan retain its dominance as the second largest economy in the world. Finance and FDI have increased due to globalisation, and whilst businesses may have to change their strategies and implement technology in the long run this will benefit the Japanese economy. Consumers have gained wider and cheaper access to goods and services, and the Government has become more aware of the implications of their policies. In the end, globalisation has negatively affected some parts of the Japanese economy, but many parts of the economy have been improved and become more internationally competitive. With strong economic policies and reform, Japan has a bright future in the global economy.
APPENDIX
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