Japan - Economic analysis of the Japanese government's growth and job creation policies, investment climate and political risk.

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MIKE P. McKEEVER INSTITUTE

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ECONOMIC POLICY

ANALYSIS

JAPAN: Economic Policy Analysis

This site presents an analysis of the Japanese government's economic policies compared to a list of 35 economic policies as prepared by student Itsuki Daito with the Mike P. McKeever Institute of Economic Policy Analysis (MIEPA). This study was written in December of 2019. To read the analyses scroll through this site. To learn more about the background policies, click here

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    The study by Specialist Itsuki Daito is presented immediately below.

    JAPAN - ITSUKI DAITO


    This study presents a detailed study of the economic policies of Japan, as written by Specialist Itsuki Daito. The ratings herein are based on the following rating scale:

    RATING SCALE

    5.0 Perfect Facilitation of Wealth Creation
    4.0 Midway between Perfect and Neutral
    3.0 Neutral Effect on Wealth Creation
    2.0 Midway between Neutral and Obstructionist
    1.0 Perfectly Obstructionist to Wealth Creation
    [Rating scale copyright Mike P. McKeever, 2019. Used herein with permission]

    RATING SUMMARY - JAPAN - ITSUKI DAITO 
    
    
    
    POLICY NUMBER      RAW SCORE   ADJUSTED SCORE     POSSIBLE  PERCENTAGE
    
            1               3.0           9.0             15.0        60 %
    
            2               2.0           6.0             15.0        40
    
            3               2.0           6.0             15.0        40
    
            4               3.0           9.0             15.0        60
    
            5               3.0           9.0             15.0        60
    
            6               3.0           9.0             15.0        60
    
            7               3.0           9.0             15.0        60
    
            8               3.0           9.0             15.0        60
    
            9               3.0           9.0             15.0        60  
    
            10              4.0          12.0             15.0        80
    
            11              4.0          12.0             15.0        80
    
            12              2.0           4.0             10.0        40
    
            13              3.0           6.0             10.0        60
    
            14              4.0           8.0             10.0        80
    
            15              4.0           8.0             10.0        80
    
            16              4.0           8.0             10.0        80 
    
            17              3.0           6.0             10.0        60
    
            18              2.0           4.0             10.0        40
    
            19              3.0           6.0             10.0        60
    
            20              2.0           4.0             10.0        40
    
            21              2.0           4.0             10.0        40
    
            22              1.0           2.0             10.0        20
    
            23              1.0           2.0             10.0        20      
    
            24              2.0           4.0             10.0        40
    
            25              3.0           6.0             10.0        60
    
            26              2.0           4.0             10.0        40
    
            27              2.0           4.0             10.0        40
    
            28              2.0           4.0             10.0        40
    
            29              2.0           2.0              5.0        40  
    
            30              4.0           4.0              5.0        80
    
            31              4.0           4.0              5.0        80
    
            32              3.0           3.0              5.0        60
    
            33              3.0           3.0              5.0        60 
    
            34              2.0           2.0              5.0        40
    
            35              1.0           1.0              5.0        20
    
       TOTAL               94.0          202.0           370.0        54.6%
                          =====          ======          =====        =====
    
    

    INDIVIDUAL POLICIES - JAPAN - ITSUKI DAITO

    1. Freedom from internal control - 3.0

    Japanese people are able to engage in any activity that is not prohibited for good reason. There are less likely to be restrictions against movement about at peopleís own discretion. However, its fundamental culture makes people think doing outstanding things is not desirable, that prevents entrepreneurs creation. I scored it 3.0.

    https://nogizaka-live.com/2019/01/24/%E3%80%90%E6%99%AE%E9%80%9A%E3%81%8C%E4%B8%80%E7%95%AA%EF%BC%9F%E3%80%91%E3%80%80%E6%97%A5%E6%9C%AC%E3%81%A7%E5%87%BA%E3%82%8B%E6%9D%AD%E3%81%AF%E6%89%93%E3%81%9F%E3%82%8C%E3%82%8B%E7%90%86%E7%94%B1/

    2. Freedom of speech - 2.0

    In the world ranking of freedom of speech, Japan has ranked at 72nd in 2017, and they are on the down trend. Reporters Without Borders(RWB) mentioned that Japanís freedom of speech has been declined since Shinzo Abe inaugurated as the prime minister in 2012. I scored it 2.0.

    https://www.sin-kaisha.jp/article/global/%E5%A0%B1%E9%81%93%E3%81%AE%E8%87%AA%E7%94%B1%E5%BA%A6%E3%83%A9%E3%83%B3%E3%82%AD%E3%83%B3%E3%82%B0%E3%80%81%E3%81%AA%E3%81%9C%E6%97%A5%E6%9C%AC%E3%81%AFg%EF%BC%97%E3%81%A7%E6%9C%80%E4%B8%8B%E4%BD%8D/

    3. Effective, fair police force - 2.0

    Since most of population is occupied by asian-Japanese people, foreign look citizens, who are likely to be minority, tend to be caught by police to do police questioning. A lot of minority people claim they are not treated fairly, so it cannot be said that it is an effective and fair police. However, over 60 % of people said police have been better or staying the same at the questionnaire about police. I scored it 2.0.

    https://togetter.com/li/1410577

    https://survey.gov-online.go.jp/s56/S56-08-56-06.html

    4. Private property - 3.0

    In Japan, there is such a strong private property owning right. This absolute ownership has a historical background since 1896, and a lot of people can protect their land, intellectual and all of the properties clearly by law. I scored it 3.0.

    https://biz-journal.jp/2016/11/post_17065.html

    5. Commercial banks - 3.0

    In 2016, for both large and small-medium businesses, Japanís commercial banks activity for lending money was positively done. They are likely to be loose in its finance activities and it helps businesses develop more. I scored it 3.0.

    https://www.dir.co.jp/report/research/capital-mkt/it/20170518_011984.pdf

    6. Communication systems - 3.0

    In Japan, 133.8 % of population uses cell phones in 2018. Besides, SNS used in Japanese people is not quite differentiated but mostly they use LINE for normal communications; so that they rarely see occasions which they have some troubles with connect to others. I scored it 3.0.

    https://news.yahoo.co.jp/byline/fuwaraizo/20180704-00087598/

    7. Transportation - 3.0

    Japan has one of the most organized transportation systems. In Washington, America, there are 6 train lines. However, in Tokyo, Japan, there are about 84 train lines. Also, the technology used for contactless payment at station gate is the most expensive one so that it is really fast to go through the gate which allows more people to get on the train quickly. However, as Japan is not large country physically, there are likely to be a lot of traffic jam whereas america can allow more cars to drive at the same time with its wide road. For countryside, there are some problems that transportational infrastructure is not that organized well as central city, elderly people find it difficult to move in their daily life. They are required to drive a car, but it might cause some traffic accident because of their age. I scored it 3.0.

    https://lifework-sora.com/tokyo_tetsudoline/

    http://www.jametro.or.jp/world/usa02.html

    8. Education - 3.0

    Japanese education quality is not bad as recent statistics indicate that well over 95 percent of Japanese are literate, which is particularly impressive since the Japanese language is one of the world's most difficult languages to read and write. However, in comparison to the U.S., their education thought makes students always look for an absolute answer; it does not support individual critical thinkings. It might work well at some points, so it would not be able to be said the quality of education is bad comparing with America, which helps students consider critically well, but it is obvious there are some problems as well. I scored it 3.0.

    https://spice.fsi.stanford.edu/docs/japanese_education

    9. Social Mobility - 3.0

    Despite not being clear in public, there are several nepostic recruitments in Japan. However, gradually though, companies started to prohibit these activities which are not only large companies but also small startups. Now, a lot of organizations consider it such an obsolete thing in Japan. I scored it 3.0.

    https://www.sidebizz.net/seek/archives/1840/

    10. Share of All Jobs in Small Businesses - 4.0

    In Japan, 70.1% of jobs are held by Small to Medium size Enterprises. It is nearly equal to ? of Japanese employment, and they play such a significant role in domestic employment. I scored it 4.0.

    http://jobgood.jp/chusho

    11. Freedom from outside control - 4.0

    There are some cases that children in Japan kidnapped to outside, but mostly Japanese people are free from outside control. Japan is such a closed country having only 1.3% foreign citizens, so Japanese people are extremely less likely to have contact with non-citizens; therefore there are less troubles happened by outside control. I scored it 4.0.

    https://news.livedoor.com/article/detail/10470834/

    https://www.us.emb-japan.go.jp/j/ryoji/shinken.html

    12. Protection of Domestic Enterprises - 2.0

    Currently, Japan is experiencing trade deficit. Vehicle industry is the largest sector in Japan, and occupy the biggest part of their export. However, they do not set any tariffs on vehicle, which makes foreign competitors relatively easily enter into Japanese market. This could affect negatively in terms of its protection of domestic enterprises. I scored it 2.0.

    https://www.naccs.jp/archives/unkyou/20170310/20170310kouen.pdf

    http://www.customs.go.jp/english/tariff/2019_4/data/e_07.htm

    13. Foreign currency transactions - 3.0

    Domestic transactions in Japan are done by Japanese yen in official. However, when businesses trade with foreign countries, USD is more likely to be used as 53.1% for export and 69.8% for import in 2015. I scored it 3.0.

    https://www.mof.go.jp/about_mof/councils/customs_foreign_exchange/sub-foreign_exchange/report/20160615sanko.pdf

    14. Border control - 4.0

    Japan has been busily strengthening systems to prevent smuggling of illegal drugs and items that could be used in terrorism, as well as gold and controlled items such as food. They introduced large X-ray machines at 16 inspection sites around Japan which examines 40-foot containers without opening them. Their border security is so tighten, I scored it 4.0.

    https://www.mof.go.jp/customs_tariff/trade/safe_society/gold/cy2018/index.htm

    http://www.customs.go.jp/mizugiwa/gold/index.htm

    15. Currency - 4.0

    In Japan, a currency used by Japanese people is Japanese Yen. This is the only currency issued in the country which is the official, government approved currency. I scored it 4.0.

    https://www.boj.or.jp/note_tfjgs/note/valid/issue.htm/

    16. Cultural, language homogeneity - 4.0

    Japan is one of the most closed country in the world. In 2017, the percentage immigrants of total population in Japan was 1.82%, which indicates that there are mostly only Japanese people in Japan. As its unique and conservative culture, Japanese people are likely to adjust for othersí behaviour each other, so there are less likely to be difficulties in cultural conflict. It is extremely easy to see and catch a common value in Japan for businesses, I scored it 4.0

    https://ecodb.net/country/JP/migrant.html

    17. Political effectiveness - 3.0

    Japan is one of the countries which have the most natural disasters. The remarkable one for Japan is an earthquake. As we have a lot of earthquakes, government tries to solve problems happening when there is earthquake; for example, the quick alert to notify people that there would be a big earthquake coming. Even though there are scientific limitations, but government also tries to excite JSDF to help injuries by earthquake in emergency case as quick as possible. I scored it 3.0.

    https://www.nhk.or.jp/ohayou/digest/2019/03/0305.html

    18. Institutional stability - 2.0

    Japanís core institutions frequently change. Even there have been only 4 prime minister in the U.K., been 14 prime ministers in Japan. That obviously indicate there is less predictability. If a prime minister does well and win the vote to keep job, there is predictability, but history does not imply that. I scored it 2.0.

    https://www.nippon.com/ja/in-depth/a02302/

    http://youth-create.jp/senkyo-column/%E6%97%A5%E6%9C%AC%E4%BA%BA%E3%81%8C%E4%B8%80%E7%94%9F%E3%81%AE%E3%81%86%E3%81%A1%E3%81%AB%E7%B5%8C%E9%A8%93%E3%81%99%E3%82%8B%E9%81%B8%E6%8C%99%E3%81%AE%E5%9B%9E%E6%95%B0%E3%81%A3%E3%81%A6%E4%BD%95/

    19. Honest government - 3.0

    Japan's corruption Japan's corruption perceptions index is 73/100, which ranks at 18th/180 countries. That indicates Japan is relatively clear country in terms of government honesity. However, there were some cases of bribe offer to other countries from Japanese private companies; for example, a Japanese company, Marubeni Corporation, offered a bribe to Indonesia and it has been punished as paying a fine $8.8 million. The important fact here is Indonesia is one of the corrupted countries (89th/180), and there are some cases Japan have to offer a bribe in order to proceed a business. I scored it 3.0.

    https://www.transparency.org/country/IDN

    https://ironna.jp/article/6078?p=2

    https://www.transparency.org/country/JPN#

    20. Common laws - 2.0

    Japan sets such high taxes for wealthy people. Its inheritance tax rate is 55%, and income tax is 45% for whose income is over $40,000. It contributes to fair distribution income for whole economy, but for this extremely high rate, some wealthy people go outside of Japan; which means total income in Japan leak from the economy. I scored it 2.0.

    https://style.nikkei.com/article/DGXMZO07439290Q6A920C1000000/

    https://news.livedoor.com/article/detail/15863035/

    21. Central bank - 2.0

    Now, with current Japanís prime minister Shinzo Abe, we do not see any extreme pressure on central bank to change monetary policy. However, as mentioned above, Japan is the most indebted country in the world as measured by debt-to-gross domestic product (GDP). As of 2018, the Japanese debt-to-GDP ratio was at an all-time high at 254%. Government debt to GDP in Japan averaged 137.4% from 1980 until 2017. So Japanís central bank monetary policy is not positively effective well. I scored it 2.0.

    https://www.investopedia.com/articles/markets/052516/japans-case-study-diminished-effects-qe.asp

    https://forbesjapan.com/articles/detail/24653/2/1/1

    22. Domestic budget management - 1.0

    Japanís tax revenue is 163533, 164963 and 101007 from 2015-2017.

    Also, for government spending is 202016, 203389 and 203963 in same period.

    Therefore, -23%, -23% and -101%; it is consistently more than 10 percent so I scored it 1.0.

    https://stats.oecd.org/Index.aspx?DataSetCode=REVJPN

    https://www.ceicdata.com/en/indicator/japan/forecast-government-expenditure

    23. Government debt - 1.0

    In Japan, external debt % of GDP was 81.018 in 2018, and 119.476 for internal. So the total government debt % of GDP was 200.494 in 2018. This is too much higher than 50% of GDP, and would see too much owed government. It negatively affects on economic growth so I scored 1.0.

    https://www.ceicdata.com/en/indicator/japan/government-debt--of-nominal-gdp

    https://www.ceicdata.com/en/indicator/japan/external-debt--of-nominal-gdp

    24. Economic statistics - 2.0

    When we access to the government owned website such as national tax agency, we can see some economic/business statistics. These are by government hence it is reliable and accurate, but as they do not really focus on publishing economic/business statistics, so we more can see unpublished data. That is, might be accurate, but sometimes not absolutely accurate. I scored it 2.0.

    https://www.nta.go.jp/about/organization/tokyo/release/h21/shinkoku_jisseki/01.htm

    25. Protection of public health and safety - 3.0

    The infant mortality rate in Japan was 1.9 in 2017, and much lower in comparison to the U.S. 5.8 in 2017. Japanís TB notification rate was 13.3 in 2017 compared to 2.8 cases in the U.S.; so Japan has relatively high rate for TB, but not infant mortality. Therefore, I scored 3.0.

    https://jata.or.jp/english/dl/pdf/TB_in_Japan_2018.pdf

    https://www.cdc.gov/features/burden-tb-us/index.html

    https://www.nippon.com/en/japan-data/h00406/close-care-keeps-japan%E2%80%99s-infant-mortality-low.html

    26. High wage policies - 2.0

    Japan's real minimum wage is •897 in comparison to •1153 in the U.S. in 2016. Among most developed countries, Japan is ranked at 8th, which is quite low. That means, there are relatively many people who is not professional cannot afford for an apartment, a refrigerator and a vacation. I scored it 2.0.

    https://www.digima-japan.com/knowhow/world/8314.php

    http://www.zenroren.gr.jp/jp/housei/data/2018/180221_02.pdf

    27. Environmental protection - 2.0

    Despite several environmental regulations existed in Japan, there is one large issue harming their environment; that is there are too many plastics for almost everything such as a package. It is reasonable to have plastic bags for purchase at some point as most developed countries do as well. However, in the most extreme case, Japan have plastic package for a normal tiny pen each. With this current situation, it is predicted that the disposal volume of plastics would be over 12 billion ton by 2050. That severely affects on their environment. I scored it 2.0.

    https://www.env.go.jp/council/03recycle/y0312-03/y031203-s1r.pdf

    https://ecoriku.jp/library/report/report_00010.html

    28. Strong army - 2.0.

    As mentioned above, Japan has no army but Japan Self-Defense Forces (JSDF) instead, which is only available to exercise its army force for self-defence. However, it is extremely limited force as not available when other organisations even belonging to Japan attacked by other countries cannot be the trigger for exercising JSDF. Therefore, they are likely to be used more in domestic situation such as natural disaster. I scored it 2.0.

    https://www.asagaku.com/jkp/2013/3/0302.html

    https://globe.asahi.com/article/12563789

    29. Foreign trade impact - 2.0

    Japanís total of export was $694B and that of import was $632B in 2017, which is the latest data. The sum of them is $1.326T. As their GDP at that time was $4.87T, so the percentage of that is about 27.2%. This is quite less than 33%, the goal; therefore, I scored it 2.0.

    https://oec.world/en/profile/country/jpn/

    30. Management of foreign currency budget - 4.0

    Japanís total of export was $694B and that of import was $632B in 2017, which is the latest data. Therefore, subtraction of them is $62B. Their GDP was $4.87T at that time, so the percentage of GDP is about 1.27%, which is closely to zero. Therefore, I scored it 4.0.

    https://oec.world/en/profile/country/jpn/

    31. Layers of collective action - 4.0

    In Japan, citizens possess the right to vote whose age is over 18. Also, there are a number of political parties, more than 10. There are 47 prefectures in Japan, and there are locally elected bodies each prefecture, city and even town as well; many locally elected organization exist in Japan, besides we can vote in relatively young age. So I scored it 4.

    http://agora-web.jp/archives/1665209.html

    http://www.soumu.go.jp/senkyo/senkyo_s/naruhodo/naruhodo02.html

    32. Pro-business climate - 3.0

    Japan is an economy closely to free-market. People are allowed to start businesses freely and those who have achieved high goal for their business are highly evaluated in society. At the same time, however, Japanese people are likely to dislike extremely outstanding ones. If a person has been successful in his/her business with much money earned, but he/she might be unfavorable for the public in case he/she is too outstanding. We are required to be quietly humble even if we are in high position. This discourages people to startup businesses at some point. I scored it 3.

    https://www.huffingtonpost.jp/2018/10/10/zozo-interview_a_23554951/

    33. Government enterprises - 3.0

    As many countries have a lot of businesses in public sector especially for essential business of daily life such as transportation, the same things happen in Japan. However, most of them have been prioritized partially as far as the price does not go up too much because of monopoly or oligopoly. This is beneficial for citizens in terms of its service quality improved as competition with restricted affordable prices; there is an incentive for companies to run their businesses more efficiently. In 2017, the latest data from Tradingeconomics.com, indicates the percentage of GDP from public sector was 38.9%. It was 40.83% in 2013, so this demonstrates there is a trend of privatisation in Japan as - 1.93% in 4 years. Therefore, government subsidies relatively a little hence I scored it 3.0.

    https://mmmedia.jp/2016/02/12/183015/

    https://www.excite.co.jp/news/article/Searchina_20150813067/

    https://www.rieti.go.jp/jp/projects/fcga2011/columns2/17.html

    https://tradingeconomics.com/japan/government-spending-to-gdp

    34. International security agreements - 2.0

    There is ďTreaty of Mutual Cooperation and Security between the United States and JapanĒ was first signed in 1951 at the San Francisco Presidio. This treaty indicates that there is a duty for America to protect Japan if they are in danger whilst they provide some military installations such as a base using Japanís ďlandĒ. However, to what extent America takes actions when the treaty invokes is vaguely described in the treaty, which means there is no absolute safety for Japanese potential entrepreneurs. Also, Japan does not have own military but Self-Defense Forces (SDF) instead. There is the MINIMUM use of force allowed for SDF only when they are attacked. However, it is they that are attacked so they are not allowed to do anything at all when other organization in Japan such as the Japan Coast Guard. They, of course, cannot attack others, either. Therefore, Japan does completely rely on Americaís protection, beside there is no guarantee America will fully protect them as its vague treaty. Furthermore, Donald Trump, current U.S. president tries to remove this treaty; there is more vulnerability in terms of self-protection waiting if this is removed.

    I scored it 2.

    https://www.asagaku.com/jkp/2013/3/0302.html

    https://globe.asahi.com/article/12563789

    35. Protection of domestic enterprises from government mandated costs - 1.0

    Japan is such a regulative country, especially, for new type of business. The recent most typical example is ride share service, as there are special permissions required to drive a fee-charging taxi which make people impossible share drives. Uber, the largest ride share service in the world, has been cooperated with Japanese taxi company so that they can offer their service but only in Tokyo, capital of Japan. This imposes more costs to expand market and users over Tokyo. Therefore, this regulation made people discourage to start a share ride business in Japan as its starting and growth cost, but they are likely to do it in other less-regulated cites such as San Francisco. There are lots of this type of regulation, which can be a huge cost for businesses, in Japan, even for world widely trending business models, hence I scored it as 1.

    https://searchenginetheory.com/uber-japan/

    https://resources.realestate.co.jp/ja/living/why-the-japanese-government-was-right-to-regulate-airbnb-in-japan-jp/

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    Introduction and Policy Recommendations

    Winning Essays: There Are Alternatives Project (TAA)

    Essay: Balanced Trade: Toward the Future of Economics

    Moral Economics

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