Japans Rise

.. table and more certain export opportunities. Canadians viewed the trade agreements as an opportunity to improve productivity and competitiveness abroad and at home. Canadians had two main goals for the agreement; to secure a substantial further reduction in the level of foreign tariffs facing our exports and to reduce and bring under control NTB’s inhibiting Canadian exports. Canada reduced protection on industries to boost efficiency and lower consumer costs however kept protection where it was still needed. The results of the agreement yielded a comparable reduction of Canadian tariffs- forty percent of Japanese, United States and EEC tariffs together helped along with comparable reduction of Canadian tariffs. Agreements were made to instate international discipline to government procurement policies.

The biggest gain of the conference for Canada was with United States exchange of tariff concessions. A deal with the United States was made that stated that there must be an injury to their economy as a precondition to imposing countervailing duties. What Japan gave us were tariff reductions in machinery, chemicals, automotive and transportation equipment. There was another agreement signed covering subsidies, countervailing duties, government procurement, technical barriers to trade, import licensing, (clear publication of procedures and simplified administrative practices) customs valuation and dumping. The agreements also brought into perspective future opportunities for both countries; one which was optimistic.

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Tariffs and other trade barriers are in the process of being reduced, and improved framework for international trade co-operation through numerous agreements was falling into place, less trade restrictive measures were being used by governments, and there was greater transparency in the system and less uncertainty for the business community. Due to the transparency in the Japanese market, Canada’s role in the Japanese economy became one of the largest consumers of machinery, cars, steel, and electronic products. Canada also plays the role of supplier of raw materials to Japan. Canada sells natural resources to a quickly expanding country with ever expanding needs for raw materials with which to fuel their thriving industrial sector. Canada’s exports to Japan include lumber, wheat, corn, and products that are land intensive. Arable land in Japan is scarce and extremely expensive and fifty-six percent of the forest area is privately owned.

The land that is used is very commonly on steep hills, where decades of reworking the soil has left it in stages of plateaus on which rice patties and farmland are held. The arable land is divided into many small farms averaging three point five acres in size. Most of the land is over used since the farmers overwork it trying to get as much out of as possible. Thus, Japan must rely on outside sources of agriculture to supply its people with the necessary products such as wheat, corn, and other grains. Canada’s position directly across the pacific from Japan made it a variable partner for trade in these commodities. The USSR is in closer proximity with Japan; however, political differences and problems made Japan view the USSR as an extremely unstable and undependable source of agriculture.

As Japan drastically increased its capacity to produce and to consume, it became a major part of the worldwide economy. However, as strong as the Japanese is, it is nonetheless susceptible to problems. There is a current recession in Japan caused by many factors, one of them being fiscal tightening representing an increase in government revenues and decreasing government expenditures. Other factors contributing to the Japanese recession included Asian economic turbulence and a Japanese banking system deprived of strength. The magnitude of the fiscal tightening was too large for the Japanese economy.

Japan was not able to absorb the fiscal tightening due to the economic crisis in some Asian countries and because of the failure of major financial institutions. After nearly four years of expansion from1987 to 1991, the Japanese economy went through a recession starting in 1991 and lasting for thirty-two months. This recession ended in March of 1993. The recession of 1991 to 1993 was the second largest recession in the postwar period. The government made efforts to reactivate the economy and introduced seven fiscal stimulus packages in four years from 1992 to 1995. The Bank of Japan cut the bank rate to 0.5 percent in 1995 and has since kept it at this record low. The government undertook a major tax reform in 1994 and cut income taxes through the tax schedule and through increases in standard personal and employment income deductions.

Therefore by decreasing revenues the government attempted to promote spending. As a result the national debt increased by about six percent of the Gross Domestic Product. Another reason for this increase in debt was that the private sector was unresponsive to the stimulus. One of the reasons for sluggish business investment within Japan was due to the unstable nature of the economy and a thus a flight of capital to the United States and other stable markets. Manufacturing industry investments increased during the 1995- 1996 period, which was a sign to economists that the economy was back on the path of self- sustaining expansion.

However the investment boom which was confined to a few machinery sectors was sort lived. Investments by construction and real estate firms continued to decrease, dragging down the economy. These private sector companies were increasingly investing their capital abroad in the form of direct investments which was leaving less and less money being inside Japan to stimulate production, increase jobs and therefore increase the money supply. To worsen the situation, a significant increase in import penetration observed from 1993 to 1995 was snuffing out domestic production. The decreasing amount of household consumption in the 90’s reflected the weak state of the economy.

Unemployment grew, which raised concerns about job security and reduced people’s willingness to consume. Weak demands for goods and services began to affect employment. Employment in manufacturing started to fall; however the difference was absorbed by the construction industry which soon became overloaded. The construction industry soon followed suit. The unemployment rate reached high national levels.

Due to corporate restructuring as well as other factors, male labor unemployment grew forcing the women of the households to try and find jobs, which was contrary to traditional values illustrating the severity of the situation. As the Japanese economy struggled to rise from the ashes, it built itself an economy based on technology, which is evident especially in the machinery, transportation and steel industries. In addition, Japan is one of the world’s leading research platforms for new technologies in robotics and electronics, making Japan a self-sustained ever-expanding country. Japan has stayed on the leading edge of the world riding a wave of technology, which will definitely carry it into the next millennium. Broad-based technological firms combined with innovative, even unorthodox, business strategies are the supporting columns of this immense notion. It is very possible for the Japanese people to overcome the conditions brought upon by the recession through the policies they have adopted, different from our own, and become the number one leading country in Gross Domestic Product.

This would put Japan in the spotlight of the rest of the world, and maybe then, we will begin to consider many of the different ways they do business.