Japans Fall

Question 1

Reasons for Japans fall

Answer 1

A. Oil shocks
B. Trade Frictions w US
C. Major Currency Changes
D. Govt policies
E. Bubble Burt’s of 1990-1991

Question 2

Effect of Oil crisis on Japan

Answer 2

Heavily dependent on cheap oil, hence oil crisis led to raised costs
1974 GNP contracted by 1.4%

Question 3

Effect of US trade frictions on Japan

Answer 3

West adopted protectionist measures in retaliation for Japan protectionism
US imports on Japan textiles
VER on Japan automobiles in 1981
1987 US 100% tariffs on $300 million worth of products

Question 4

Effect of major currency reforms

Answer 4

Collapse of BWS led to floating of USD and depreciation to the yen, and since the yen was a lone floater, the depreciation of the USD led to overvaluing of yen and stagnation of investments
Made worse by Plaza and Louvre Accord in 1985 and 1987 which caused the yen to appreciate sharply and lose the price competitiveness

Question 5

Japans misguided Govt policies

Answer 5

Loss of control of bureaucrats used to push firms towards new growth areas
Sunsetting firms pushing politicians to further protect them instead of shif
Led to inability to be flexibility anymore
MITI unable to shut down inefficient steel plants and shift resources due to intense pressure from workers.
Oversights on monetary policies; as the yen appreciated and government decided to reduce interest rates to stimulate economy, this led to excessive borrowing and loaning into investors that poured them into assets like land, leading to price bubble on land, where the price was rising quicker than the real value.

Question 6

Japans misguided Govt policies

Answer 6

Loss of control of bureaucrats used to push firms towards new growth areas
Sunsetting firms pushing politicians to further protect them instead of shif
Led to inability to be flexibility anymore
MITI unable to shut down inefficient steel plants and shift resources due to intense pressure from workers.
Oversights on monetary policies; as the yen appreciated and government decided to reduce interest rates to stimulate economy, this led to excessive borrowing and loaning into investors that poured them into assets like land, leading to price bubble on land, where the price was rising quicker than the real value.