Japan Inc.

Japan Inc. depicts a highly modernized and structuralized system  of this country and an export-oriented development strategy. In some ways Japan became authentic  due to its capitalistic and cooperative manner in addition to the exportation surplus of the last century. Although Japan succeeded in terms of corporatism, it overcame a long time period full of stagnation and low GDP increase.

Historical background

Japan, Inc. got a negative reputation in the eighties, When western investors and consumers considered Japanese companies and corporations to be integrated in an unfair trading activity. Nevertheless, the protracted 90s recession in Japan destroyed the power of Japan Inc.

After a prominent defeat, Japan endured dramatic transformations, which let the other world perceive the country in a less stereotypical way.

The main peculiarity of Japan, Inc. is referred to as the key chair of the Ministry of Commerce, which led the development of Japan in the post-war years as part of exportation, also known as the Japanese Miracle. Its growth was provided by the help of American investments excessively after the war period and governmental regulations.The government of Japan limited importation activity and supported exportation whilst  the Bank of Japan (BoJ) initiated active lending to corporations to maintain private investment.

An active cooperation between corporate chairmen and government officials led the government to establish leaders. It’s important to mention another significant feature of Japan Inc. known as the institutionalized union between companies, such as ‘keiretsu’, which prevails in economic activity in Japan. The Japanese miracle molded the basis of Japan, Inc. and held until the financial crisis.

Japan Inc. in crisis

In the seventies Japan manufactured Gross National Product (GNP), taking the second place, while the USA was at the top, A decade later it took the first place in terms of GNP the world. In the first half of 1990s, its economy entered the phase of stagnation, which refers to the so-called lost decade of Japan. During the boom cycle, it was mainly due to speculation.

Phenomenal low rates caused the speculated stock market and immovable property to rise, which led to overvaluation in the 1980s. The Government tried unsuccessfully to stimulate the economy with public works projects. In addition, the Bank of Japan was in no hurry to intervene, which may have triggered the low. When creditors were forced to confirm debt default, provoked by profiteering assets, the finance ministry of Japan boosted interest rates to stop speculation. It led to a banking crisis, which ended up consolidation and state aid.

The economy was in a state of stagnation with low growth and deflation during a lost decade, At the time when  stock markets were about to take extraordinary lows, And the immovable property market remained below the level that existed before the boom. While the crisis was crashing the state, Japanese customers minimized their money waste and kept some savings, which led to a decrease in aggregate demand and led to deflation. Customers saved even more monetary assets, which led to a deflationary spiral. Elderly Japanese population was accused as one of the roots of a lost decade. Moreover, Japan's lunar politics in raising the retirement age and raising taxes, as well as illusive monetary policy were also condemned for the lost decade.