Table of Contents

Introduction.........................................................................1
Production of output performance analysis............................2
Labour market analysis.........................................................6
Price level analysis...............................................................7
Conclusion............................................................................ 8
Reference............................................................................. 9

Introduction
Japan is located at the east of Asia and northwest to the Pacific, it is one of the
most highly developed capitalist countries in the world. Due to the geographic
location, Japan is lack of resources and heavily depended on imports.
Manufacturing industry is highly developed and is the main pillar of its national
economy. At the same time, Japanese has developed very strong scientific
research ability, which is backed up with a large number of well-known
multinational companies and research institutions (Sheard, P., 1989). After the
world war two, Japan's economy has been rapidly developed. Japan took
advantage of the a large number of processing and manufacturing industry
organizations moving from United States to Japan, absorbed the US funds,
learned from the United States advanced technology, science and modern
management experience. They not only imitation from US, but also strengthen,
localize and innovate based on US, which made Japan the worlds strongest
country of absorbing, analysing and improving technology from foreign countries.
Japan's economy is highly developed; the residence in the country has a high
standard in terms of living quality (Bergsten, C. F., & Noland, M., 1993).
According to the most recent statistics, Japan has a GDP per capita of $ 39,731,
which is ranked at 17th in the world. If calculated in terms of purchasing power
parity, the GDP is ranked third in the world (after the United States and China);
per capita gross domestic product is the first 23 in the world. This essay is going
to research and discuss Japans economic performance recent 10 years through
the indicators such as real GDP, GDP growth rate, real GDP per capita,
unemployment rate and inflation rate, to trace and predict the future economic
performance of the country.

Production of output performance analysis

Figure 1 and 2 shows the real GDP and GDP growth rate of Japan from 2004 to
2013. If we draw a line above the bars of the chart, we can easily find out the
trend of the economic performance throughout this decade is overall growing.
However, in the years from 2006 to 2008, Japanese GDP showed a slope
downwards. The GDP dropped from 4,660 billion dollars to 4,360 billion dollars.
But the government had expected this drop. The Cabinet Office announced that
Japan's economic growth expectation for fiscal year 2007, would be adjusted
down from 2.1% to 1.3%. This is caused by internal factors and external factors.
Internally, due to tightening of policy of building license permits, The rate of
building new housing was likely to be the lowest among recent 40 years. Cabinet
reported decline in the real estate market would drag down nearly 0.6 percent of
GDP that year. Externally, Japan, as a country heavily dependent on external
resources, the global impact of resource prices is crucial to the economic
performance of the country (Lucas, R. E., 1988). The United States is the major
customers of Japanese export product, its huge spending and purchasing power
has been a powerful boost of economic growth in Japan. However, with the
crisis of the subprime problem left US consumption became slow, in
consequences, Japanese GDP dropped. Other factors include oil prices
fluctuation also contributes to the economic downturn in that period. Along with
the global economic recovery from 2009, the countrys economic has back to
track again and showed a significant increase from 2009.

Figure 1 Japan Real GDP from 2004 to 2013

Figure 2 Japan GDP growth rate from 2004 to 2013

From Figure 2, we can see the GDP growth rate is approximately in line with the
GDP except for the significant and dramatically hole takes place in 2009. But it
is not difficult to explain. After the global economic recession, Japan limped out
in 2009 crisis and created the huge grow from 4,360 to 4,850 billion dollars. This
is not a normal way government control the macroeconomics, but due to
extraordinary factors. Therefore, when the global economic back to normal, the
associated GDP growth rate curve back to normal as well.

Figure 3 Japan real GDP per Capita from 2004 to 2013

Figure 3 describes an interesting chart for real GDP per Capita from 2004 to
2013. Unlike real GDP, which shows the overall economic performance of the
country as a whole and influence in the world, the real GDP per Capita reveals
the quality of life people in the country live like. Sometimes, a country has a really
high GDP, it has such big influence in the world, and have the power to build
weapons and invest in aerospace industry, whilst when it comes to the real GDP
per Capita, the figure becomes so small, that the people in the country live a
stressed life with very limited resources to use. And sometimes, a country has
small GDP due to the size of the country, therefore, its influence is relatively
small but the quality of peoples life is high (Freeman, C. 1989). People can
afford to buy house and spend time for holidays rather than work overtime.
However, Japan is none of them. Japan is not a big country in terms of size, but
the real GDP is high and the real GDP per Capita is high as well. Therefore, from
this we can see the economic power of the country. The significant drop in real
GDP per Capita of 2010 can be explained using the same reason for the internal
and external factors. And except for this year, the real GDP per Capita of the
country maintains average same controllable level throughout the decade.
Therefore, in the future, the level of peoples living quality would be staying high
stannard as usual.

Figure 4 Japan Unemployment rate from 2004 to 2013

One of the characteristics of the Japanese economy is the low rate of

unemployment. Even during the economic downturn, the rising of unemployment
rate was only between the range of 4% to 5%.In contrast, when compared to the
United States, even in the times of economic boom, the unemployment rate is
around 5%. When the economy is in a downturn, the unemployment rate is as
high as about 10%. Other developed countries in the world, such as Britain,
France, Canada, at the 80s of 20 th century, the unemployment rate were more
than 10%. The reasons of Japans low unemployment rate can be explained
mainly in two aspects. Firstly, Japans lifetime employment system. Lifetime
employment means to hire graduate job seekers from the various universities,
and once they are officially employed by organizations, they can work in the
same company until retirement, unless employees resign due to significant
mistakes.

It reduces the rate of staff turn over, enhance the stability of

organization, and it encourages employees loyalty to the organization. Secondly,

Japan has powerful trade union. Dismissal of an employee can involve many
procedures, and trade unions removed organizations right of appeal. Therefore,
regardless how the economic performance the country has, the unemployment
rate will maintain at a relatively low level. Of course during the economic crisis
time (special cause), the employment rate hit a new high point, but it dropped to
the normal level soon when the crisis is controlled.

Figure 5 Japan inflation rate from 2004 to 2013

Figure 5 shows how Japans inflation rate change in the past decade. There is
also a steady increase almost every year. Since the last century Japan's rapid
economic growth, it requires a lot of exports, and the trade surplus is in favor of
inflation. With the IS-LM model to analyze can be very clear, at a lower R time,
Japan caught in a liquidity trap, in which case, no matter how much money bank
of Japan made, they would be held by nationals. Which is exactly that "lost
decade" of Japan when economic has been weak from 1991 to 2000 and the
central bank put a lot of money to the market (Benhabib, J., & Spiegel, M. M.,
1994). Then Japanese Yen appears some rise, which also caused a slightly rise
in Yen interest rates, so the citizens that held a large number of currency came to
the market. But the Japanese economy in the short term in fact did not rise
much, so it cause a situation which a lot of money bid for a small amount of
goods, prices naturally rose significantly. And so the increase of the inflation rate
in the figure 5.

Labour market analysis

According to the figures in the employment rate chart, and news from Japan's
Ministry of Internal Affairs, under the overall context of gradual economic
recovery, Japan has more women want to get jobs instead of taking care of the
family only, therefore, Japan's unemployment rate would be affected, and may

create a potential growth (Scherer, F. M., & Ross, D., 1990). In the past, most of
Japan women are used to staying ta home after getting married. But since the
more and more competitive business environment, most male started to feel the
increase of stress to support a family by one person. The associated society
problems of increasing rate of suicide can reflect such phenomenon. Japan's
Ministry of Internal Affairs believes that there are more people join the market of
looking for jobs now is the main cause of the growth of unemployment, especially
in Japan during the slow economic recovery, there are more Japanese women
are willing to leave their homes and search for job to help their husbands in
supporting the family. A more detailed report of unemployment rate of Japan
showed specifically among the unemployed people, the male unemployment rate
growth is 0.1 percentages to 3.8%, and the female unemployment rate growth of
0.1 percentage point to 3.5%.

Price level analysis

From last year, dollar has risen strongly, and after the Bank of Japan easing
ushered in a tidal wave of devaluation, the dollar against the yen rose above 120,
which is a new high since the last eight years, but the yen's slump does not
appear to save the Japanese economy. According to Bloomberg News reported,
only large export business organizations are benefited from Japan's depreciation
of the yen. Many manufacturing organizations unemployment rate has no
significant improvement, since the yen 36% depreciation in 2014. According to
recent news, although yen is weaker and weaker, and in consequences, Japan's
exports have been boosted, but overall did not significantly improve employment.
There are a lot of factories that still built their production lines abroad to reduce
cost and increase competitiveness (Posner, R. A., 1973). Some large
manufacturers, such as Panasonic, Daikin air conditioning expressed they would
consider take actions to drive part of the Japanese employment higher, but due
to the fact that Japan is in lack of resources and rely heavily on imports, after the
change of value of yen, the costs of imported production lines back home is not

easy to those organizations. The governments "Abenomics" is to stimulate

economic by easing recovery, stimulating employment and salary growth,
promote consumption so as to achieve out of two decades of deflation purposes.
But did not show significant improvement in employment; salaries also did not
significantly increase, which makes the consumer-driven inflation target out of
reach. Goldman Sachs commented that although the Japanese government
implemented a strong stimulus, but decreasing the inflation is still a big challenge
to them. The global oil prices fell, and the raising of the consumption tax and so
on will all have a negative impact on inflation of Japan. Therefore, the
government has a long way to go to manage the inflation rate.

Conclusion
Overall, Japan has been through the hard days of economic for many times. But
they have the unique culture and united people, which can form core competency
of the country, and lead the country out of crisis. But the Japanese government
has to be aware of the new trend of female going to the job market and its impact
to the unemployment rate. At the same time, the global oil prices and other
external factors that affect Japanese economic too much, which can be a
potential threat to the country stability, which should be also addressed to the
government.

Reference
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Freeman, C. (1989). Technology policy and economic performance (p.
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Lucas, R. E. (1988). On the mechanics of economic development. Journal
of monetary economics, 22(1), 3-42.
Posner, R. A. (1973). Economic analysis of law.
Scherer, F. M., & Ross, D. (1990). Industrial market structure and
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