Tsutomu Watanabe, 04 April 2020

It has only been a month since the coronavirus shock emerged in Japan and its full nature is still unclear. This column compares the responses of consumption and prices to the COVID-19 shock and another large-scale natural disaster that hit Japan, the Tohoku earthquake in March 2011. The responses of supermarket sales and prices at a daily frequency during the two crises are quite similar. However, evidence suggests that whereas people expected higher inflation for goods and services in the wake of the earthquake, they expect lower inflation in response to the coronavirus shock, suggesting that the economic deterioration due to COVID-19 should be viewed as driven mainly by an adverse aggregate demand shock to face-to-face service industries such as hotels and leisure, transportation, and retail, rather than as driven by an aggregate supply shock.  

Francesca Spinelli, Dorothée Rouzet, Hongyong Zhang, 03 April 2020

Multinational firms face complex decisions regarding where and how to set up their activity. Their location choices also take into account complementarities between activities and between markets. This column uses micro-data on Japanese foreign affiliates to shed light on what drives these complex location strategies for Japanese multinationals, and argues that policies to foster FDI attractiveness, especially to be chosen as the location of export platforms, need to take into account these complementarities. 

Masayuki Morikawa, 27 February 2020

Japanese listed companies are recruiting many more outside directors to their boards in response to changes in corporate law and governance codes. The column uses data on firm performance to show that these changes have had no impact yet on the risk-taking behaviour or performance of firms. One-size-fits-all regulation may not be in the best interests of all firms.

Masayuki Morikawa, 10 February 2020

Although long-term macroeconomic forecasts substantially affect the sustainability of government debt and the social security system, they cannot avoid significant uncertainty. This column assesses whether academic researchers in economics make accurate long-term growth forecasts, comparing ten-year growth forecasts made by Japanese economists in 2006–2007 with the realised figures. Even excluding the years affected by the Global Crisis, the results show that forecasts tend to be biased upwards and involve significant uncertainty, even for economics researchers specialising in macroeconomics or economic growth.

Keisuke Kondo, 14 January 2020

Increasing productivity is a top priority challenge for the Japanese economy under the current population decline, and the idea of raising the minimum wage in order to spur productivity growth has piqued interest among policymakers. This column suggests two ways in which firms may respond to a minimum wage hike: some may carry out reforms to increase productivity in response to the hike, while other less-productive firms may exit the market. The overall effect on productivity will vary across countries and firms, since the relative strength of these two effects depends on a country’s firms’ characteristics and market structure.

Yuzuka Kashiwagi, 06 December 2019

With more frequent and severe natural disasters, demand is growing for governments to support affected firms in their recovery. This column investigates the impact of subsidies after the Great East Japan Earthquake. It finds that capital subsidies were effective for the retail sector, but not in the manufacturing or other service sectors. The results suggest that the heterogeneity comes from variations in the degree of private support across sectors rather than variations in supply chain disruption.

Tetsuji Okazaki, 13 November 2019

During World War II aircraft production in Japan increased sharply. This column, part of the Vox debate on the economics of WWII, examines the reasons for this ‘production miracle’, focusing on an aircraft manufacturing plant of Mitsubishi Heavy Industries Co., one of the two largest aircraft producers in Japan. The key to the production increase was the expansion of the supplier network. Mitsubishi Heavy Industries organized many suppliers to provide aircraft parts to its plants. However, in the final stage of the war, destruction of the supplier network by strategic bombing and an earthquake caused the collapse of the company’s aircraft production.

Tsutomu Miyagawa, Takayuki Ishikawa, 13 November 2019

Following the Global Crisis, some countries increased expenditures on research and development (R&D) to address secular stagnation. This column investigates how successful this rise in R&D scale was in supporting productivity growth in Japan and other advanced economies. It argues that R&D efficiency has declined in many of these countries in the past decade, compared to the preceding ten years. This suggests that increasing R&D spending is not enough to foster growth, and that countries need to do more to support innovation and collaboration in carefully chosen sectors.

Chang Sun, Zhigang Tao, Hongjie Yuan, Hongyong Zhang, 03 November 2019

The trade war between the US and China has had impacts on other countries – including Japan, one of the most important trading partners of both countries. The column uses quarterly sales data and stock market returns to show that the operations in China of Japanese MNCs have been negatively affected by the trade war, especially when Chinese affiliates rely heavily on trade with North America. This has led to a reduction in their stock prices. 

Willem Thorbecke, 02 October 2019

Japanese exports in electronic parts and components dramatically fell in value after the Global Crisis and have not recovered until today. This column investigates why Japan lost this comparative advantage. It argues that capital inflows seeking safe havens during the crisis led to a sharp appreciation of the yen and caused yen export prices to tumble relative to production costs. Plummeting profits then hindered Japanese firms from investing enough in capital and innovation to compete with rivals.

Hiroko Okudaira, Miho Takizawa, Kenta Yamanouchi, 24 September 2019

Studies often find an aggregated near-zero employment effect when increasing the minimum wage. But the effects might vary if local employers in different regions have different market power. The column examines increases in the minimum wage in Japan and finds a more pronounced negative employment effect in local labour markets where employers had less control over wages.

Hideo Owan, 19 September 2019

Many Japanese companies complain about a shortage of qualified workers. This column argues that the difficulty is partly driven by flawed recruitment practices and suggests improvements to the hiring process. For example, customised aptitude tests and team-based structured interviews could help remedy the situation. 

Hiroyasu Inoue, Yasuyuki Todo, 10 September 2019

Natural disasters can have enormous economic consequences that affect firms both directly and indirectly. Using the example of the Great East Japan Earthquake, this column investigates how the propagation of shocks varies with the characteristics of supply chains. It finds that the indirect effects are far larger than the direct effects. Shocks propagate more widely and are more persistent if supply networks have complex cycles and low input substitutability.

Phillips Payson O’Brien, 03 September 2019

Allied victory in WWII is usually viewed through the lens of large land battles, from Stalingrad to Kursk to D-Day. However, battlefield losses of equipment in these ‘great’ land battles were relatively small and easily replaceable. This column demonstrates that the real effort of the major powers was put into the construction of air and sea weapons. The Allies used their air and sea power to destroy the Axis’s in a multi-layered campaign. This was the true battlefield of WWII: a massive air-sea super battlefield that stretched for thousands of miles. Victory in this super-battlefield led to victory in the war.

Alan Bollard, 05 September 2019

The World Wars precipitated unprecedented economic problems in all countries. This column, part of a Vox debate on the economics of WWII, describes how economists played a larger role in WWII than in any previous conflict. They advanced the methods of public finance and influenced the directions of the war effort. By the end of the war, economists were widely embedded in government and policymaking.

Cormac Ó Gráda, 02 September 2019

Of WWII’s warring powers only the Soviet Union suffered mass starvation, but as this column, part of a Vox debate on the economics of WWII, describes, it is a measure of the war’s global reach that 20 to 25 million civilians died of hunger or hunger-related diseases outside Europe. In Britain effective rationing ensured a ‘fair’ distribution of food supplies throughout the war and in Germany the famine conditions experienced in 1918-19 were not replicated, but Japan was facing semi-starvation at war’s end. In Europe, apart from Greece and the Soviet Union, famine mortality was modest, but 3-5% of the populations of faraway Bengal, Henan, and Java perished. 

Tomoya Mori, Jens Wrona, 16 August 2019

The gravity equation has often been used to explain trade between regions or cities within countries. But it assumes that the distribution of industries is exogenous. This column explains how trade estimates are affected if we assume that large, centrally located cities attract more industries whose firms are more likely to export to other cities. Japanese data show exports from these cities are systematically underpredicted by aggregate gravity estimations, as the theory predicts.

Tomoya Mori, 11 August 2019

The growth of large cities is often attributed to their proximity to exogenous, first-nature advantages. This column uses data on 450 Japanese cities to show that in fact, the regularity of agglomeration holds as a natural consequence of endogenous agglomeration and dispersion forces at the global or local level, rather than exogenous factors.

Sayuri Shirai, 18 July 2019

Modern monetary theory (MMT) has recently gained prominence in light of doubts about the effectiveness of monetary policy in addressing economic shortfalls. This column assesses the implications of implementing the theory’s policy prescriptions, and the challenges it presents in the case of Japan – an economy that some have argued has already been subject to such policy. Japan’s labour shortages and low inflation mean modern monetary theory’s fiscal stimulus suggestions may be harder to implement than they initially seem.

Toshimori Otazawa, Yuki Ohira, Jos van Ommeren, 09 July 2019

Relationship-based distance has become as important a determinant of firm interactions as physical distance in recent years. This column presents evidence to support the claim that firms physically locate closer to others that proximate in their transaction networks, though this effect varies across industries and by age of firms.

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