Japan was the first Asian nation to achieve modern economic growth. This column discusses new evidence suggesting that Japan’s growth started from a lower level than Britain’s and grew more slowly until the Meiji Restoration. The key to understanding modern economic growth seems to lie in identifying the forces that dampened growth reversals, rather than the forces responsible for growth itself.
Jean-Pascal Bassino, Stephen Broadberry, Kyoji Fukao, Bishnupriya Gupta, Masanori Takashima, Wednesday, July 1, 2015
Takatoshi Ito, Satoshi Koibuchi, Kiyotaka Sato, Junko Shimizu, Monday, June 29, 2015
Japanese firms have been struggling with the yen’s volatility ever since the peg was dropped in 1973. This column, based on a recent survey of Japanese firms, argues that many firms have managed their exchange rate exposure by using operational and financial hedging strategies. It also finds that firms employing currency hedge and invoicing exports in yen are judged by the market to have reduced currency exposures.
Petr Matous, Yasuyuki Todo, Tuesday, June 16, 2015
Japanese business groups, or keiretsu – cartels of companies with interlocking interests – have contributed much to the success of Japanese manufacturing in the 20th century. This column explores the future of this form of corporate governance, amid increasing calls for their dissolution. An examination of trade networks in the automotive industry shows that automakers no longer exhibit a preference for dealing with keiretsu partners. Globalisation, procurement scandals, and advances in modularisation have helped to erode the benefits of these long-term relationships.
Masayuki Morikawa, Friday, May 22, 2015
World trade in services is increasing rapidly but micro evidence remains scarce. This column employs firm data from Japan to argue that service-exporting firms are more productive than non-exporting firms and goods-exporting firms. Information asymmetry, transportation costs, differences in institutions, cultures, and languages increase the fixed costs of service trade. Therefore, highly productive firms are more likely to self-select into service trade.
Tomohiko Inui, Makiko Nakamuro, Kazuma Edamura, Junko Ozawa, Saturday, May 2, 2015
In order to achieve sustainable growth, Japan should make an efficient use of its labour force. However, female labour force participation and the share of women in leading positions in Japan remain low. This column investigates the impact of board diversity on firms’ innovative activity using Japanese firm-level data. The findings suggest that board diversity is associated with innovation only for firms that have already acquired diverse management skills.
Yuko Kinoshita, Fang Guo, Tuesday, March 31, 2015
Japan and Korea need to encourage female labour market participation to counter acute labour shortages. This column argues that following Nordic countries’ experiences, it would be possible to achieve both high female labour force participation rate and fertility rate. However, this is only possible if supported by appropriate public and private sector policies.
Hirofumi Uchida, Arito Ono, Wednesday, February 11, 2015
It seems like natural disasters should harm the economy by destroying lives and capital. This column investigates the extent to which disasters can lead to creative destruction through ‘natural selection’ of the fittest firms. Surprisingly, the rate of closure due to bankruptcy decreases – perhaps due to aid. Firm exits following the Tohoku earthquake were predominantly voluntary closures, with firms seizing the moment in order to leave an ageing market.
Hiroyasu Inoue, Kentaro Nakajima, Yukiko Umeno Saito, Wednesday, February 11, 2015
Despite vast improvements in information and communications technology, the tendency of firms in related industries to cluster together hardly changed between 1985 and 2005. This column examines the relationship between geographic clustering and innovation using establishment-level data from Japan. Research establishments – especially those in high-technology industries – are more localised than average. The degree of localisation is greater when establishments are weighted by their creativity, as measured by the number of patents created and the number of citations received.
Tomohiko Inui, Keiko Ito, Daisuke Miyakawa, Tuesday, January 6, 2015
While large Japanese firms have been present internationally for years, small firms have found it difficult to overcome the information obstacles associated with entering overseas markets. This column argues that lender banks can help as they not only provide financial support but also business consulting services using their extensive knowledge obtained through lending transactions. It shows that small and medium firms whose lender banks accumulate more overseas market information are more likely to start exporting.
Kozo Kiyota, Thursday, November 27, 2014
A major concern with multinationals is that they can cause disemployment (also called job offshoring). However, FDI could offset or even exceed such a negative effect. This column examines to what extent disemployment in Japan is related to FDI. The results suggest that disemployment in Japan is driven by substitution between capital and labour, rather than the reallocation of labour caused by FDI.
Masayuki Morikawa, Sunday, November 23, 2014
The appropriate level of public sector wages is debated frequently in every country, and the debate has intensified in the wake of the global financial crisis. This column presents evidence that regional wage differentials in Japan are greater in the private sector than in the public sector. In regions where public sector wages are relatively high, skilled individuals may self-select into public sector jobs. At the same time, public sector employers in metropolitan regions such as Tokyo may have difficulty in hiring high quality employees.
Kuniyoshi Saito, Daisuke Tsuruta, Friday, November 14, 2014
In Japan, loans with 100% guarantees account for more than half of all loans covered by public credit guarantee schemes, but banks claim that they do not offer loans without sufficient screening and monitoring even if the loans are guaranteed. This column presents evidence of adverse selection and moral hazard in Japanese credit guarantee schemes. The problem is less severe for loans with 80% guarantees.
Ryohei Nakamura, Wednesday, October 1, 2014
Many Japanese municipalities found recent population predictions for the next 30 years rather alarming. Unfortunately, most of them do not have an effective solution to the declining population problem. This column discusses different strategies that could ignite innovation and stimulate the growth of the population. Bringing in new business, identifying their comparative advantage, and stimulating community innovation could make municipalities attractive places to settle down.
Takashi Oshio, Seiichi Inagaki, Friday, September 26, 2014
Starting one’s working life in an irregular job can lead to a fruitful career or to long-term stagnation. While studies of European labour markets support the stepping-stone hypothesis, this column presents evidence that irregular jobs lead to negative midlife outcomes in Japan. Future jobs are less stable, pay less, and psychological distress is higher. Such problems suggest a role for policy to reduce economic and social disadvantages of non-regular workers.
Chie Aoyagi, Giovanni Ganelli, Tuesday, August 19, 2014
Japanese corporations hold a very high level of cash on their balance sheets compared to those in other advanced countries. Such excessive corporate savings are likely to be holding back growth by preventing a more efficient use of resources. This column presents recent research showing that improving corporate governance would help unlock Japan’s corporate savings, exit deflation, and revive growth. Comprehensive corporate governance reform should be a key component of Japan’s growth strategy.
Coen Teulings, Richard Baldwin, Wednesday, September 10, 2014
The CEPR Press eBook on secular stagnation has been viewed over 80,000 times since it was published on 15 August 2014. The PDF remains freely downloadable, but as the European debate on secular stagnation is moving into policy circles, we decided to also make it a Kindle book. This is available from Amazon; all proceeds will help defray VoxEU expenses.
Kaoru Hosono, Daisuke Miyakawa, Wednesday, August 13, 2014
Natural disasters affect firm activities both directly and indirectly. One prominent indirect effect is on firms’ transaction partners, in particular – their banks. This column shows how damage to banks affects firm activities, such as capital investment and exports, using as a natural experiment Japan’s 1995 Kobe earthquake. Bank damage has a significant and negative impact on both firm investment and on exports but this effect does not last very long.
Kaoru Hosono, Daisuke Miyakawa, Saturday, August 9, 2014
In the wake of the Global Crisis, several central banks have adopted unconventional monetary policies. This column presents new evidence from Japan on the transmission of monetary policy through banks’ balance sheets. Overall, the evidence suggests that bank net worth affects loan supply, that the effect depends on monetary policy and economic growth, and that this bank balance sheet channel has a significant impact on firms’ financing and investment. Exiting from unconventional monetary policies when bank balance sheets are weak could thus have a severe adverse impact on investment.
Masayuki Morikawa, Sunday, July 20, 2014
Innovation is a key driver of productivity growth, but innovation in the service sector has received relatively little attention. This column shows that the total factor productivity gap between Japanese firms with and without innovations is larger in services than in manufacturing. Whereas the percentage of firms holding patents is much higher in manufacturing than in services, trade secrets are just as important in both sectors. These results suggest that the protection of trade secrets makes an important contribution to productivity growth.
Hiromi Ishizuka, Thursday, July 10, 2014
Japan has one of the highest labour market gender gaps among the advanced economies. This column examines the current status of gender diversity in management in Japan, China, and South Korea. Despite some pronounced differences, economic gender gaps are large in all of the three countries. But overall, gender diversity in management in Japan is slowly beginning to emerge.