Japan's Economic Slump

Japan's Economic Slump

1. Introduction

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In only fifty years, Japan has moved from poverty to the highest

levels of income, from economic insignificance to leadership from the

import of technology and capital to being a major source of their

export, from less developed status to the lead of economic position

after the United States. After being the best performer in the

Organisation for Economic Cooperation and Development (OECD) during

the forty years, Japan has experienced economic stagnation since the

beginning of the 1990s.

The revival of the Japanese economy is of great importance not only to

Japan but also to the well being of global economy. Therefore, the

question now is "What has happened to the Japanese economy supremacy"?

In order to answer the question, my task is to identify the factors

and causes that contributed to Japan's economic supremacy and the

subsequent downturn. Also in the process, I will identify the reform

processes initiated by the government to address the economic woes.

This paper begins with a presentation on the Japanese dynamic economy.

The following sections present the Japanese model and Japanese

management style respectively. Economic crises and reformation will be

presented in the consecutive sections leading to some conclusion.

2.0 The dynamic economy

The rise and decline of the Japanese economy has been an important

feature of the world economy over the last decade. In 1945 Japan was

totally ruined but became the second largest economy over a 50-year

period. Japan's rise from the devastation of military defeat to the

second largest economy in the world has b...

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...te public investment to more

productive areas (Bigsten, 2004, p.10). The specific ingredients of

the Japanese model that need reforms include labour market structure

and industrial relations, financial structures, and the industrial

conglomerates. The structure may earlier have given Japan considerable

advantage, but it is quite likely that it now has outlived its

usefulness (Bigsten, 2004, p.14). The world economy is now changing

rapidly. To keep up with the other leading countries, Japan needs to

be able to adjust more rapidly than before.

Japan is trying to increase the flexibility of the economic system by

deregulation and market reforms. If the country succeeds with these

reforms at the same time as it manages to maintain the social

discipline of the old system, the economy should be able to make a

comeback.