Monthly Archives: May 2013

Dispute

the sovereignty dispute over the islands of Etorofu, Kunashiri, and Shikotan, and the Habomai group, known in Japan as the “Northern Territories” and in Russia as the “Southern Kuril Islands,” occupied by the Soviet Union in 1945, now administered by Russia and claimed by Japan, remains the primary sticking point to signing a peace treaty formally ending World War II hostilities; Japan and South Korea claim Liancourt Rocks (Take-shima/Tok-do) occupied by South Korea since 1954; China and Taiwan dispute both Japan’s claims to the uninhabited islands of the Senkaku-shoto (Diaoyu Tai) and Japan’s unilaterally declared exclusive economic zone in the East China Sea, the site of intensive hydrocarbon prospecting

economy

In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan develop a technologically advanced economy. Two notable characteristics of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan’s industrial sector is heavily dependent on imported raw materials and fuels. A small agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. While self-sufficient in rice production, Japan imports about 60% of its food on a caloric basis. For three decades, overall real economic growth had been spectacular – a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. Modest economic growth continued after 2000, but the economy has fallen into recession three times since 2008. A sharp downturn in business investment and global demand for Japan’s exports in late 2008 pushed Japan into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9.0 magnitude earthquake and the ensuing tsunami in March disrupted manufacturing. The economy has largely recovered in the two years since the disaster, but reconstruction in the Tohoku region has been uneven. Newly-elected Prime Minister Shinzo ABE has declared the economy his government’s top priority; he has pledged to reconsider his predecessor’s plan to permanently close nuclear power plants and is pursuing an economic revitalization agenda of fiscal stimulus and regulatory reform and has said he will press the Bank of Japan to loosen monetary policy. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2012 stood as the fourth-largest economy in the world after second-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2012. The new government will continue a longstanding debate on restructuring the economy and reining in Japan’s huge government debt, which exceeds 200% of GDP. Persistent deflation, reliance on exports to drive growth, and an aging and shrinking population are other major long-term challenges for the economy.

Government

Executive branch:
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chief of state: Emperor AKIHITO (since 7 January 1989)
head of government: Prime Minister Shinzo ABE (since 26 December 2012); Deputy Prime Minister Taro ASO (since 26 December 2012)
cabinet: Cabinet is appointed by the prime minister
(For more information visit the World Leaders website Opens in New Window)
elections: Diet, the bicameral legislature, designates the prime minister; constitution requires that the prime minister commands parliamentary majority; following legislative elections, the leader of majority party or leader of majority coalition in House of Representatives usually becomes prime minister; the monarchy is hereditary
Legislative branch:
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bicameral Diet or Kokkai consists of the House of Councillors or Sangi-in (242 seats – members elected for fixed six-year terms; 146 members in multi-seat constituencies and 96 by proportional representation) half elected every three years; and the House of Representatives or Shugi-in (480 seats – members elected for maximum four-year terms; 300 in single-seat constituencies; 180 members by proportional representation in 11 regional blocs); the prime minister has the right to dissolve the House of Representatives at any time with the concurrence of the cabinet
elections: House of Councillors – last held on 11 July 2010 (next to be held in July 2013); House of Representatives – last held on 16 December 2012 (next to be held by 15 December 2016)
election results: House of Councillors – percent of vote by party – DPJ 31.6%, LDP 24.1%, YP 13.6%, NK 13.1%, JCP 6.1%, SDP 3.8%, others 7.7%; seats by party – DPJ 106, LDP 84, NK 19, YP 11, JCP 6, SDP 4, others 12
House of Representatives – percent of vote by party (by proportional representation) – LDP 31.6%, DPJ 16.6%, JRP 22.2%, New Komeito 12.2%, Your Party 7.7%, TRP 3.9%, JCP 4.4%, others 0.56%; seats by party LDP 294, DPJ 57, JRP 54, New Komeito 31, Your Party 18, TPJ 9, JCP 8, others 4, independents 5
Judicial branch:
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Supreme Court (chief justice is appointed by the monarch after designation by the cabinet; all other justices are appointed by the cabinet)

Geography

Japan has a total of 6,852 islands extending along the Pacific coast of East Asia. The country, including all of the islands it controls, lies between latitudes 24° and 46°N, and longitudes 122° and 146°E. The main islands, from north to south, are Hokkaido, Honshu, Shikoku and Kyushu. The Ryukyu Islands, which include Okinawa, are a chain to the south of Kyushu. Together they are often known as the Japanese archipelago.
About 73 percent of Japan is forested, mountainous and unsuitable for agricultural, industrial or residential use.] As a result, the habitable zones, mainly located in coastal areas, have extremely high population densities. Japan is one of the most densely populated countries in the world.

The islands of Japan are located in a volcanic zone on the Pacific Ring of Fire. They are primarily the result of large oceanic movements occurring over hundreds of millions of years from the mid-Silurian to the Pleistocene as a result of the subduction of the Philippine Sea Plate beneath the continental Amurian Plate and Okinawa Plate to the south, and subduction of the Pacific Plate under the Okhotsk Plate to the north. The Boso Triple Junction off the coast of Japan is a triple junction where the North American Plate, the Pacific Plate and the Philippine Sea Plate meets. Japan was originally attached to the eastern coast of the Eurasian continent. The subducting plates pulled Japan eastward, opening the Sea of Japan around 15 million years ago.
Japan has 108 active volcanoes. During the twentieth century several new volcanoes emerged, including Shōwa-shinzan on Hokkaido and Myōjin-shō off the Bayonnaise Rocks in the Pacific. Destructive earthquakes, often resulting in tsunami, occur several times each century. The 1923 Tokyo earthquake killed over 140,000 people. More recent major quakes are the 1995 Great Hanshin earthquake and the 2011 Tōhoku earthquake, a 9.1-magnitude quake which hit Japan on March 11, 2011, and triggered a large tsunami. Japan is substantially prone to earthquakes, tsunami and volcanoes due to its location along the Pacific Ring of Fire. It has the 15th highest natural disaster risk as measured in the 2013 World Risk Index.

Japan

In 1603, after decades of civil warfare, the Tokugawa shogunate (a military-led, dynastic government) ushered in a long period of relative political stability and isolation from foreign influence. For more than two centuries this policy enabled Japan to enjoy a flowering of its indigenous culture. Japan opened its ports after signing the Treaty of Kanagawa with the US in 1854 and began to intensively modernize and industrialize. During the late 19th and early 20th centuries, Japan became a regional power that was able to defeat the forces of both China and Russia. It occupied Korea, Formosa (Taiwan), and southern Sakhalin Island. In 1931-32 Japan occupied Manchuria, and in 1937 it launched a full-scale invasion of China. Japan attacked US forces in 1941 – triggering America’s entry into World War II – and soon occupied much of East and Southeast Asia. After its defeat in World War II, Japan recovered to become an economic power and an ally of the US. While the emperor retains his throne as a symbol of national unity, elected politicians hold actual decision-making power. Following three decades of unprecedented growth, Japan’s economy experienced a major slowdown starting in the 1990s, but the country remains a major economic power. In March 2011, Japan’s strongest-ever earthquake, and an accompanying tsunami, devastated the northeast part of Honshu island, killing thousands and damaging several nuclear power plants. The catastrophe hobbled the country’s economy and its energy infrastructure, and tested its ability to deal with humanitarian disasters.

Japan Printing More Money?

When there is a surge in capital flows after Japan’s unprecedented bid to pump up its economy, do you believe the upside of cheap cash and a stronger Japanese economy outweighs the risks?

The Bank of Japan stunned the world last month with its plan to release some $1.4 trillion to end nearly two decades of stagnation and deflation. While others including Bank of Japan Governor Haruhiko Kuroda said they would be on the lookout for signs of unintended spillovers on emerging economies, many hope that the benefits of increased Japanese consumption outweigh the risks of asset bubbles, inflation and the competitive impact of a weaker yen.

Would Asia gain from investment by Japanese companies and in infrastructure that would result from Prime Minister Shinzo Abe’s economic program? How do we monitor capital flows to pre-empt risks to financial and economic stability? Are there previous examples?  What are some history lessons we can study?

Some people think this looks like a currency war. The US and Japan are reducing the value of their respective currencies by seeing who can print the most money; all in an effort to gain a trade advantage in the international trade market. For sure inflation is going to be the results.

Does anyone else see the addiction parallels between quantitative easing to financial systems and crack or meth to druggies? The euphoric highs, the consuming need for more, the detachment from reality, the abandonment of basic moral principles?

This is a most interesting experiment. It will be interesting to note what the yen will be worth vs the dollar a few years from now.  Japan is now feeling the economic pressures of China and to survive in its own turf, it has to realign itself to sustain its grip as an economic power in Asia.