The Impact of Globalisation upon the Japanese Economy

Authors Avatar

The Impact of Globalisation upon the Japanese Economy

        Globalisation has had a significant impact on Japan’s economy. It has affected every part of the economy, even social life. These parts include the amount of international trade, the flow of international finance, the way businesses operate, consumers, government policy, labour market and also the environment. Globalisation has several main drivers that have specifically influenced the Japanese economy. These drivers include transnational corporations (TNC), the role of the government and government policies, trade liberalisation, technology and the deregulation of many financial markets around the world. These drivers have had a beneficial impact upon Japan, however it has also forced changes, which are arguably negative on the Japanese way of life and economy.

        Japan is an archipelago and is situated north east of China. Japan's economy is the second largest in the world, at US$4,190.7 billion gross domestic product (GDP) and have a high per capita income of approximately US$32,859 in 2003. The Japanese economy currently accounts for 7.1 per cent of global GDP and in 2002 was over 10 times larger than the Australian economy. In recent times it has slumped into recession with deflationary rates, economic growth has slowed dramatically, to a low of 0.2% in 2002, and –1.1% in 1998. However, in the previous three decades, Japan experienced a very high rate of economic growth by almost 10% each consecutive year. Domestic spending is the main factor in the Japanese economy, with consumer spending accounting for 55-60% of the economic activity, however consumer confidence in Japan is low and therefore presents a problem. The most recent debate has been America’s increase in steel production trade barriers, which prohibit foreign entry.

        The impact of globalisation on Japan’s various trade flows has been quite positive. Globalisation is the process of bringing the world closer and more interdependent upon one another. It can be of a cultural, political, social or economical nature, but is more commonly used for economic nature. Trade flows are the exports and imports between the country and the world. In the past Japan has relied on world trade and international business and has its international competitiveness to thank for its success as an economy. The influential TNCs in Japan for example Sony or Toyota, have caused a significant increase in both imports and exports. Because TNCs try to minimise costs, recently there has been a shift of production to China for the main parts of production. Often unfinished goods such as electronics are sent over to China and back to Japan to minimise labour costs. This has made China and other Asian countries, such as The Republic of South Korea (RSK) and Taiwan popular destinations and have some of the highest trade flows. For example, the exports to China are valued at ¥3 352 701 million, and imports from China are valued at ¥4 374 386 million. Other figures are contained in Figure 1 (Appendix).

The Japanese Government has been promoting trade for decades, as it saw the opportunity for economic growth and development. It provides detailed surveys, services, and policies to help businesses trade and thereby promotes it.

Trade liberalisation has not had as much impact on the Japanese economy as it has had on many other countries. There has only been one significant free trade agreement (FTA) signed and is the bilateral agreement between Singapore and Japan which was made on January 13th 2002. The agreement entailed the removal of tariffs on 94% of Singapore’s exports to Japan, which is up from the current level of 84% and covers about 3800 items. This has been met with limited success, as there has been a decrease in the amount of goods traded from ¥903 393 million (m) in 2001 to ¥861519m during 2003 in exports and ¥325750m to ¥315875m. These figures do not take the economic downturn and other external factors into consideration, such as Singapore’s economic status or the global economic status. However the FTA between Japan and Singapore should boost trade in the future, as tariffs on many items are removed.

Join now!

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 ...

This is a preview of the whole essay