How the Japan Governments, as well as its Institutions, Have Been Instrumental towards the Development of Japan - Case Study Example

Japan Name Course Name and Code Instructor’s Name Date The citadel intent of this paper is to illuminate how the Japan governments, as well as its institutions have been instrumental towards the development of Japan. The paper elucidates wide-ranging factors; it begins by giving a background of non-governmental organizations (NGOs) activities in Japan. The paper explains how the government supported NGOs activities through funding a number of its programs as well as enactment of regulations that were softer on NGOs. The paper explains how foreign direct investment has contributed to Japans development. This was also achieved by advancing loans on foreign owned companies by the Japan Development Bank. There were also incentives for foreign companies. Japan also improved its production labour relation. Japanese government, as well as institutions has immensely contributed towards development of Japan between 1980s and 2007. Japan has had a proliferation of NGOs that are development-oriented as well as their access to government. Japan has a handful of NGOs that deal with environmental affairs. It has also had development as well as relief organizations. However, these organizations were scrawny, unapt and did not have contact with government. Nonetheless, in 1990s, Tokyo started taking NGOs seriously since they perceived as agents that could help in execution of aid undertakings and likely devotees of foreign aid in the country’s political system as well as the public (Sonia, 2004). According to Warren & Leheny (2009) in the late 1980s, the state had begun financing NGOs activities in Japan. The state increased grants along with subsidies for NGOs; the amount was raised from about 400 million yen to 1.2 billion in duration of ten years. However, after 1998 it began decreasing the amount of aid. In 1991, the state had established an innovative system that its citizens would put their savings in postal savings accounts and were offered an option by the Ministry of Posts and Telecommunication to commit between 10 to 100 percent of their interest on the savings for use by NGOs in development work abroad. Funds raised through this scheme were relatively limited in size; however, they offered extra funding to NGOs and engaged the public directly in development projects as well as aid. The government also buttressed passage of regulations that ease conditions for incorporation for Japanese NGOs as it was so constricting and few could qualify. In 2001, a law was enacted, it gave tax reprieve to the private contributors to qualified NGOs; nonetheless, the standards were still intricate. A handful of NGOs could meet the new requirements. By 2003, funding for NGOs reached the DAC average of 2 percent (Warren & Leheny, 2009). The Japan government established wide-ranging consultative instruments with the NGOs in 1990s. Prior to the end of 1990s, these machineries proliferated and were also entrenched, with MOF, MOFA, JICA as well as JBIC meeting regularly with the NGOs as well as taking their advice on wide-ranging issues such as policy as well as problematic issues (Warren & Leheny, 2009). MOFA was instrumental in the development of networks of NGOs - taking part in education, relief, health as well as agriculture - through which it directed funds to NGOs in the respective sectors. The efforts by the Japan government to encompass NGOs were perceived by NGO staff as both well intentioned as well as pertinent. The increase in capacities, number as well as access to the Japan government on the side of NGOs began to establish the political foundation, as well as capabilities in Japan of an aid program and eventually more aligned with that of other DAC member states (Gionea, 2005). In the early 2000s, after years of fiscal immobility, pressure was building up for overhaul in Japan especially institutions, policies as well as practices considered redundant to its economic growth. In 2001 Koizumi Junichiro, the freshly elected prime minister (PM) seized advantage of the prevailing situation to launch numerous economic restructuring programs (Gaunder, 2011). The PM used mantra of structural modification to describe his modifications since he targeted long-term economic system and institutions, not alterations in policy. Among his reforms were regulatory reforms, public sector reforms, fiscal reforms, tax reform, social security and pension reform as well as reform of completion policy. The Prime Minister resorted to simplistic slogans such as “structural reforms without sanctuaries” and “no growth without reform” so that the Japanese public could get his message. He believed that reforms were instrumental for the revival of the country’s economy (Gaunder, 2011). Political institutions evinced signs of change. In the 2005 election, that Prime Minister Koizumi won a decisive vote for reform in the wake of opposition from LDP was perceived by all and sundry as weakening the LDP factions and strengthening Koizumi and the LDP party in the Diet. Another potential political change evident in 1990s involved increased interest on the side of parliamentarians in Japanese aid as well as Japanese foreign policy in general. The LDP developed its own Special Committee on External Economics Assistance to follow-up aid issues. Diet members began examining ODA reforms that were being considered by the Japanese government (Gionea, 2005). After interventions by one of the ODA members, the Japan government was prompted to make adjustments on the ODA charter. The government was also notified that Diet members would be watching implementations of the ODA changes and if they regard them as ineffective ODA members were supposed to raise their concerns. Reforms initiated by Koizumi led to major changes, particularly within the LDP. Establishing reforms efforts began by his predecessors Yasuhiro Nakasone and Ryutaro Hashimoto. Koizumi’s efforts were mainly engrossed on developing an autonomous leadership task for the prime minister in the government as well as within his party. Nakasone’s reforms were prompted by neo-liberal paradigms of small sate as well as privatization. The agenda was contested with the central government bureaucracy and LDP. To attain these goals, Nakasone developed various administrative reforms, accompanied by a system of special advisory committee that was staffed by professionals from academia and business sectors. He used the media to augment support for policies that he had instigated as well as avoid opposition from the LDP. The two approaches offered the prime minister control over information, within party decision-making process and towards the public, consequently strengthening the responsibilities of the prime minster. Correspondingly, Hashomoto strived to develop independent decision-making capabilities in the PMs Office through launching of large-scale administrative reforms, as well as reorganization of ministries. Koizumi used the new structures as well as developed administrative system, which bypassed the earlier overriding decision-making structures within LDP. Koizumi established Council of Fiscal and Economic Reforms that was assigned with making policy proposal, which were introduced in the Cabinet. Between 1950 and 1990, about US$ 18.4 billion of investment was channelled in Japan (Genzberger, 1994). Outward, as well as inward investment to and from Japan is no restricted. Nonetheless, foreign investment in Japan necessitates thorough consideration with respect to manufacturing, marketing, taxation as well as distribution. Nevertheless, Japan has been very consistent in promoting foreign investment since early 1980s through the provision of a number of incentives, reducing regulations as well as encouraging importation of goods. Before World War II, industrial development in Japan was restricted in three places: Osaka, Tokyo as well as Nagoya. Prolonged economic development in the three cities led to concentration of industries as well as people in these regions. On the other hand, outlying regions such as Tohoku, Hokkaido, Kyushu and Shikoku have experienced less development and traditionally have not attracted investors. By 1960s, extensive migration to major towns led to severe regional imbalances (Genzberger, 1994). Overcrowding and pollution became common social issues around the major urban centres in Japan. The government responded by developing programs that restricts factories from constructing in major towns of the country. The government also modernized transportation networks in the rural areas in Japan. By doing so, it encouraged development in rural areas and opened up these areas so that they can be more accessible. The Japanese government enacted various measures including financial as well as tax incentives so that they could attract business in the under developed areas in Japan. Additionally, the Regional Development Corporation, a government-sponsored organization, began construction of industrial parks. However, industrial location program had not been achieved by mid-1980s. Additionally, most of the industries had shifted from labour-intensive manufacturing to capital-intensive that was based on advanced technologies. Pressure from its major trading partners to deregulate its economy so that it becomes open to foreign investors was increasing (Genzberger, 1994). The Japanese government developed strategies in late 1980s so that it could fast-track regional development of high-technology industries (Genzberger, 1994). Less-developed areas in Japan where Technopolis parks have been developed, land as well as building spaces are inexpensive and plenty. Wage rates in these regions are also lower compared to the major urban regions. There were 26 areas in Japan that were designated Technopolis areas by 1993 (Genzberger, 1994). All the regions, research institutions have been developed or expanded; colleges and universities have been developed, and some have been enlarged and companies in high-tech industries as computer software, as well as hardware, biotechnology as well as new materials have been opened by investors for business (Genzberger, 1994). According to Liou (2002), Japan’s economy declined significantly in early 1970s. Apart from the oil shock in 1973, there were a number of issues in its economy. Japans economy was overheated, inflation was increasing exponentially, and its long-term growth potential began to decline. When labour productivity increased, wages also increased, and it lost its comparative advantage in the labour-intensive industry. However, this was politically difficult to give chance to a large-scale unemployment as well as bankruptcies. The government reacted promptly so that it could safeguard inefficient sectors from domestic as well as foreign competition through webs of laws along with subsidies. The long-term outcome was overinvestment as well as decrease in productivity of its economy in totality. Consequently, the government developed a dual economy syndrome that is characterized by an efficient, competitive export sector, increasingly dragged down by corrupt, inefficient as well as costly domestic sector. In the 80s, productivity deficit was hidden by the “bubble economy’” as economic growth increased owing to the large-scale financial speculations. Japanese companies raised money through banks at low interest rates. The money was used for large-scale development in fixed capital that led to overinvestment, therefore adding to adding to its productivity issues. Firms became involved in speculations, when the value of stocks as well as real estate increased, they were able to make use of their assets as collateral for raising money to purchase more stacks, the process led to an upward economical spiral, the bubble economy. When major firms were able to acquire funds cheaply through the issuance of equities and bonds, companies shifted from being depended on bank lending. Consequently, banks, which had been conservative in their lending policies, were prompted to shift their loan portfolios into riskier sections, and after a short while, the banks were lending money for highly speculative purposes (Liou, 2002). In 1989, policy makers were nervous owing to the speculative boom as well as sustainability of the sudden assets price increase (Liou, 2002). Policy makers acted wisely to stop supply of easy money as well as prevent the boom from rising to dizzying levels. The Bank of Japan increased interest rates between 1989 and 1990, as well as the bubble burst. The prices of stocks were affected immediately, and the Nikkei stock index declined from 39,000 yen to 20,221 in a time period of one year (Liou, 2002). In 1993, the government developed Japan Agenda 21, which stated that the government intended to restructure its socio-economic system into one that will enhance sustainable development as well as committed to support NGOs. Additionally, passing of the Basic Environment Law (BEP) in 1994 also entailed developing as well as nurturing productive government-NGO relationship, and this was as a response to the Agenda 21. The government fixed economic development as one of its fundamental national objective and worked to have limited financial, material as well as human resources in strategically vital industries that were leading growth and structural modernization. Japan had cooperation with domestic private companies and managed to develop various manufacturing industries, including high-tech industries that later on became very competitive worldwide. In the 1980s, Japanese firms joined the ranks of major producers in the manufacturing; this is attributed to its successful industrial policy. Family-owned conglomerates were instrumental in economic growth. Founders of the family-owned conglomerates increased the range of its activities; therefore, boosting most of the sectors of the economy simultaneously. Firms that were in the same conglomerate and worked in a number of business sectors helped each other when an immature legal system, poor enforcement of law, as well as underdeveloped financial markets made it hard to rely on arm’s-length transactions to offer financial inputs as well as the required materials. Japans’ corporate business philosophy – prioritizing long-term stability as well as increasing the organization, market shares as well as production volume over profit rates stimulated its economic growth. Another unique element of its corporate world was that it emphasized on long-term transaction ties between key industrial producers, such as Hitachi or Toyota, and their small and medium-scale suppliers of parts, equipment, along with materials. Consistent close interaction between final-product markets as well as their suppliers prompted technological sophistication as well as scrupulous quality control. Japan had productive labour relations that helped in creating commitment. The labour relations in Japan were helpful in enhancing motivation at the workplace and also helped in reducing labour-related conflicts. The most sophisticated version that was established in Japan resulted in a cohesive human resource management system that had various unique features such as on-the-job rotation, personal training, information sharing as well as appropriate delegation of authority in firms. The systems were instrumental in nurturing highly skilled as well as strongly committed labourers that were regarded as the most fundamental resource in the company. Primarily, the East Asian model of capitalism was perceived to be a transitional system that could be relevant for catch-up economies that had immature market institutions. However, in the 1980s, the perception changed and subsequently it outperformed Western Europe as well as the US. Japan was ranked among world economic leaders and subsequently outshone the Western Europe and US both in growth levels as well as in terms of quality products as well as production efficiency. Consequently, the four NIEs, and later Thailand, Malaysia, and with reservations, Indonesia, became followers. Thus, East Asian Capitalism, with Japan as its leader was perceived as an alternate model in a number of aspects and not only to developing countries but also to developed countries. The model was promising since it was perceived to be helpful in providing faster growth, competitiveness as well as fighting evils of Western capitalism, for instance, marginalization, increasing unemployment, social inequality, large income gaps, poor labour motivation of workers, social unrest, moral degradation, rising crime rates and destructive labour conflicts among others. Japan’s civil societies have increased in number. The many societies in Japan have been instrumental in catalysing change. The 1995 Kobe earthquake is always pointed out as an experience that catalysed growth in the civil society. The tragedy catapulted civil society organizations for various reasons; nonetheless, its civil society has been developing prior to and after the Kobe earthquake. Apart from expansion of civil societies, they have also diversified. It is believed that the associations in Japan increased from 1960 to 1996, and the greatest increase came from business and labour organizations. Most of the development has been in types of organizations identified as “citizen groups” these groups parlance the prize their independence from bureaucracy. The high number of these societies reflects two distinct factors: factors Japan and internationally. The many civil societies in Japan prompted economic development in Japan. The high number of civil societies at national and individual level prompted economic development in the country (Yip, 2000). In 1951, the Japan Development Bank was established so that it could supplement private sources of finance as well as help implementing government’s development. The Japan Development Bank (JDB) has a division that is exclusively set for foreign companies that have a foreign capital share of 50 percent or more. Eligible foreign-owned companies are those that do invest in high-technology fields that include R&D facilities, who promote the exchange of cutting-edge technology or who increase imports significantly. In 1993 interest rates on these loans was 5 percent for eligible foreign investors. However, foreign investors who did qualify were also given the loan but at 5.2 percent interest rates. The loans periods were very friendly and flexible since they could last from 1 year to 25 years. However, the interest rates may vary according to the resources available at JDB. The loans would be processed in one month, this is adequate since it does not slow or delay development projects compared to when the loan review process would more long (Chen, 1995). Foreign investors considering investing in Japan can get wide-ranging resources in Japan and oversees. The main Japanese semi-public and public organizations providing basic information as well as consultation services are the Japan Development Bank (JDB), Japan External Trade Organization (JETRO), the Japan Regional Development Corporation and the Industrial Location Bureau of the MITI. Another important source of information is the Centre for Development of Power Supply Regions (CPR), it is a semi-public organization established in 1990. The organization provides free factor site retrieval services that include data on water supply, land prices, transportation and has about 5,000 factory sites. Additionally, various private organizations provide basic info along with consulting services for potential investment sectors in Japan. Some of these organizations include law firms, accounting firms, commercial banks, trading houses, management consulting firms as well as real estate agencies. Concisely, the Japan government and its institutions have been very instrumental in the development of Japan. Both the government and institutions developed strategies that propelled development in the country. This was evidenced through an increased numbers of NGOs as well as their related activities. The government also financed NGOs activities in the country. Japan Development bank offered loans to foreign-owned companies this encouraged foreign companies to invest in Japan. There were also some incentives that were given to the foreign owned companies. Most of the foreign-owned companies had cutting-edge technology hence this catapulted development of Japan. References Chen, M. (1995). Asian management systems: Chinese, Japanese and Korean styles of business, international. London: Thompson Business Press. Gaunder, A. (2011). Routledge handbook of Japanese politics. Taylor & Francis. Genzberger, C. (1994). Japan Business: The portable encyclopaedia for doing business with Japan. San Rafael: World Trade Press. Gionea, John (2005) International trade & investment, An Asia Pacific perspective, 2e. New York: Mcgraw-Hill. Liou, K. (2002). Managing economic development in Asia: From economic miracle to financial crisis. London: Greenwood publishing Group. Sonia, K. (2004). Business in Asia Pacific: Text and cases. Oxford: Oxford University Press. Warren, K & Leheny, D. (2009). Japanese aid and the construction of global development: Inescapable solutions. Abingdon: Routledge. Yip, G (2000) Asian advantage: Key strategies for winning in the Asia-Pacific region. London: Addison Wesley. Read More