Comparative Analysis between Japan and Brazil Economies - Assignment Example

Comparative Analysis between Japan and Brazil Economies Introduction Japan and Brazil are two countries that have stableand fast growing economies and political systems. Japan ranks among the best economies in the world as it lists at position three in the financial records of the best performing economies in the world. Brazil on the other side is one of the countries that are growing at alarming rate and is apparently the largest economy in the Latin America. Economic analysts have been expressing visions that going by the current economic development, Brazil will most likely become the world’s superpower. Since the two countries are nearly the same with strong economies (stable economies), it is therefore important to analyze the main distinguishing aspects of the two leading global economies. This paper will provide in depth comparative analysis of the two countries since the rise of Keynesian theory to the current economic and political standing of the two countries. Japan classifies among the world’s most stable economies. Japan is known for its rich history of producing high quality automobiles and electronic goods. Electronic products manufactured is Japan have positive reputation in the global market and make significant sales. In addition, vehicles produced by the Japanese automakers enjoy high recognition in the world market due to the low pricing, low consumption of fuel, easily accessed spare parts and general high quality of the cars. Brazil on the other hand ranks among the countries whose economy is growing at a remarkable. Essentially, Brazil is a member of the collective developing countries classified under the BRICS acronym. Brazil’s economy has a rich history of expansive agricultural activities that mainly involve large-scale plantation of coffee for commercial purposes. Brazil is in effect the world’s leading producer and exporter of coffee. Both Japan and Brazil currently enjoy the advantages of stable economies. However, the two countries differ in that Japan is an already developed country while Brazil is underway to attain state of classification under the world’s first class economies. The differences between the two countries also arise with consideration to political events that have transpired through the history of the countries. Japanese Political Environment before 2001 Between 1912 and 191, the political elite in Japan underwent through the period of Taisho occasioned with the monarchial rule under the perceived weak Prince Yoshihito. The political system of Japan in from 1912 to 1918 was under the rule of self-proclaimed leaders known as the genro. In between 1912 and 1918, Japan’s political system faced military threat intended to the influence the cabinet. With the progress of war in Europe, Japanese political system used the situation to extend its influence of boundary expansion into China. Between 1919 and 1926, the Japanese political system transformed to involve two party systems that encompassed the conservative party named Rikken Doshikai and the Pro democracy party named Seiyokai. The two parties worked in collaboration towards strengthening of Taisho democracy that nurtured the voting right of the citizens. Assassination assumed part of the Japanese politics with eventual murder of the first interparty Prime Minister Takashi Hara in 1921. Japanese political elite structured laws to bar formation and development of the Communist Party in 1923. The political elite feared that development of the Communist Party would result to the communism in the economy of the country. The period between 1927 and 1929 marked the beginning of the Showa period following the rise of Emperor Hirohito to power. Showa period also witnessed the beginning of a fading a fading democracy with two coalition parties practicing alternation in power. Japanese political system also faced shaky moments between 1930 and 1939 evidenced by increased military led killings and explosion. The national army also did assassinate Prime Minister Inukai with increased influence of army on government’s decisions regarding foreign affairs. The dominance of political parties in Japan gets dissolved and Army Minister Hedeki Tojo ascends to power as the country’s prime minister and reigns between 1940 and 1945. In 1941, Japan under intense rule of the army conducts attacks on the Pearl Harbor. In 1946, Japan got its first constitution that created monarchial rule and parliament that consisted of House of Representatives and House of Councilors. Article 9 of the new Japanese constitution also declared the end of war and a ban of the regular national military. In addition, the constitution accorded women the right to vote. In 1952, Japan gained independence followed by split in the conservative parties and rise in socialist party and emergence of several minor political governments. Citizens, students and Socialist Party merge to conduct opposition on the Japan-US peace treaty. The Japanese government under the rule of Prime Minister Tanaka increased national spending alongside cutting trade relations with the US in 1972. Japanese government resolved for talks with the Soviet and Chinese leaders to mend trade relations between the countries. In 1974, the prime minister face charges of corruption leading to his imprisonment. The opposition party in Japan collaborates with the government in passing the Treaty of Mutual Cooperation and Security as well increasing government spending on the national defense. In the year 1983, the Conservative Internationalists settle for improvement in the US-Japan ties using defense and series of summits. Another corruption case strikes Japan politics leading to the resignation of Prime Minister Noboru Takeshita. Japan turned into a single party state after major coalitions between the Social Democratic Party and the Liberal Democratic Party, which resolved to strengthen the ties with the US. Brazilian Political Environment before 2001 Brazilian politics on the other hand, was under rule of coalition parties, which represented different regions of the country (1985-1987). Between 1990 and 191992, Brazilian government signed free market within its borders. The government also declared for total crackdown on corruption cases to oust corrupt leaders from the Brazilian political elites. In the same period, the government faced opposition due to the increase of corruption cases in the government leading to eventual sacking of cabinet ministers. During the same period, Brazil faced uproar in political tension leading to impeachment of the president from power. Between 1993 and 1994, cases of corruption rise in the Japanese government and eventual appointment of the committee to conduct investigation on the Congress members accused of corruption. Japanese Economy before 2001 In 1935, the Japanese economy neared worst economic depression but was salvaged by the government’s adoption of expansionary policies that enable the country to enjoy an annual growth of 5%. Despite the impressive economic growth, Japanese economy still faced higher levels of poverty and unemployment that led increased influence military on the economy. The engagement of Japanese government in war with the Asia in 1940 ruined the Japanese economy leading to passage of control laws entailing freeze in price and wages to all business operations and markets counter effects of inflation. The US government used its ties with Japan to stop militarized economy and introduced land, labor and antitrust reforms intended for recovery of the economy and raising level of competition. In 1950, Japanese government passed the Dodge plan that assisted in cutting the national spending and reduction of inflation accompanied by relaxation of price control laws. The rise of war in Korea boosted Japanese economy due to increase in demand for goods and services thereby annexing economic recession. Through 1955 to 1959, Japanese bureaucrats, firms and political elite collaborated to regulate production activities in the country. The Ministry of Finance took in control access to credits and supply of currency into the economy as the Ministry of International Trade and Industry took measures to regulate quotas, permits, mergers and operations of industries in the economy. The entire economic regulations adopted by various authorities led to significant recovery of the economy. Many Japanese companies faced closure due to shortage of laborers and increase in wages between 1960 and 1964. In the period between 1965 and 1972, Japan economy stabilized with remarkable rise in quality and quantity of car and electronic production leading to increase in trade surplus coupled with an annual economic growth at the rate of 10% thus depicting Japan as the second largest economy in the world. The rise in the cost of oil between 1973 and 1979 led to inflation and deterred economic growth. Between 1980 and 1984, Japanese government transformed its economy from energy dependent work force to knowledge-oriented economy. The government also expanded its spending in research, which according to Keynesian theory led to increased supply of money in the economy thus the improvement in the economic performance. During 1985-1989, prices for land and general stocks increased alongside low interest rates that led to economic bubble. The government also increased the number of industry privatization with phone and rail being part of the target. In 1990 through 1995, the bubbling in the economy increases significantly with crash in the prices of stock and land leaving the banks with massive debts. The attempts by the government in reforming the energy and air transport sector to sparkle growth faces between 1998 and 2000 faces impediment from the outstanding debts held by banks. Brazilian Economy before 2001 Brazilian economy on the other faced major inflation and recession lapsing between 1982 and 1985 resulted IMF sanction Brazil from accessing credit due to the Mexican debt crunch. Between 1986 and 1989, the Brazilian economy encountered decline in the value of export and persistent public debt resulted by increased money supply in the economy and fall in agricultural productivity. In a move to rescue the economy, government implemented liberalization trade policies that lasted from 1990 to 1992 alongside privatization of major state owned institutions. In the year 1999, Brazilian currency faced devaluation that assisted in rescuing the economy. The government also reviewed privatization policies to ensure increase foreign investment, and as a result, the economy recorded 4% growth rate at the end of 2000. In 2001, the economy of Japan faced internal energy crisis derailed economic growth. Brazilian Economic status since 2001 Brazilian economy is the seventh largest in the world. Brazil also ranks at position eight among the countries with large purchasing power. Brazilian economy is in effect the largest among the Latin American countries. Brazil runs an almost free market with an inward structured economy. Brazil has been highlighted the countries with the fast growing economy in the world with an annual GDP growth rate of 5%. In 2009, the GDP of Brazil counted an almost R$3.145 trillions. Brazilian economy enjoys trade partnership with almost hundred partners. Brazilian exports estimates at 60% with majority of the goods comprising of manufactured and semi-manufactured goods. Brazilian economy also enjoys the boost with the advanced technology6 as the country manufactures submarine deices and aircrafts. Brazil also practices the production of large amount of ethanol. Furthermore, Brazilian economy benefits from big oil reserve exploited in the deep seas that comprises 73% of its total oil supply. Brazilian economy also benefits from the great performance of the service sector that generates 66.8% of the GDP. With reference to the country’s 2007 economic statistics, the industrial sector contributed an average of 29.7% towards the national GDP. Brazilian economy also encompasses agriculture that contributed 3.5% to the national GDP of 2008. The Brazilian labor force estimates at around 100.9 million. The service sector holds the largest number of the labor force with whooping 71% of the total work force in the country. The industry sector on the other hand boosts of an almost 19% of the total labor force in the country. The remaining 10% of the country’s labor force is occupied by the agricultural sector. With a huge population of 187 million civilians, Brazil resorted to practicing agribusiness that covers cattle and crop rearing aimed at absorbing part of the country’s great population. Much of agricultural activities take place in the rural areas with great financial and technological boost from the government. The Brazilian economy exhibits the largest number of herds of cattle in the world with an average population of 198 million. Brazil is the world’s producer of soybean. The country also contributes 81% to the total world’s production of orange juice. In addition, Brazilian economy boosts of 25% contribution of refined and cane sugar to the total world’s production of the item. The industrial sector of involves production of automobiles, steel, petrochemicals, aircrafts and computers, all of which sets the country in the second position after US as pertains to American countries with well established industrial sectors. The nature of Brazilian banking sector has allowed the citizens wide range of products as well as attracting numerous market entrants. Moreover, Brazil economy has extended mineral resources with large reserves of iron and manganese that are significant industrial raw materials. Brazil also has significant deposits of nickel, beryllium, copper, gold, zinc and lead. Brazil has stable energy supply especially when it embarked in the expanding international oil production in 2006. The hydroelectric power supply in Brazil is substantially stable with production capacity of 270,000 megawatts thus ranking among the world’s largest hydroelectric power. The hydroelectric power contributes 90% of the country’s total power supply. The fiscal statistics of the country produced in 2008 unveiled per capita income of $ 10,466. In 2011, Brazilian employment sector was set to operate under a minimum wage of R$ 546 per month. Source: Brazilian Economy Watch, 2009 In a move to cushion its economy from the dire effects of credit crunch and financial crisis that befell the world in 2007, the government of Brazil formulated Law of Financial Responsibility destined to control public expenditure at all levels of government. Brazilian government also reviewed its laws to encourage export, development of industries and trade thus creating conducive environment for local and foreign investors into the economy. The government also adopted tax cuts while raising financial incentives that raised private investment that led to 0.2% increase in GDP of 2009. The government also increased credit supply by 38% to financial institution in 2008. The government also reduced the requirement for bank reserve. Japan’s economic status since 2001 Japanese economy on the other hand ranks the third largest in the global ratings after the US and China. Japanese economy recorded an average GDP of $5.391 trillion in 2010. The per capita GDP clocked ‘$34, 200 in 2010. Since the end of Hiroshima war, Japan has been recording significant economic growth ought to result from the increased spending on war. Japanese economy has been enjoying the advantages of annual GDP growth rate of 2.1% upon the adoption of policies encouraging export between 2003 and 2007. Japan also boosts of expansive mineral resource with substantial deposits of gold, magnesium and silver used in the industries. However, Japan does importation of iron ores, copper, alumina and forest related products. In the year 2009, foreign demand for Japanese products depreciated thereby raising the price of yen leading to retard GDP growth rate of -5.3%. In the beginning of 2010, Japan’s economy recorded a negative GDP growth rate of -3%, which later rose to 4% during the same year. Japanese economy has also been facing negative effects of natural catastrophes like earthquakes and tsunamis that derail and undermine the economic development of the country. For instance, the earthquake that hit Japan in 2011 resulted to 3.6% contraction in the first quarter of the fiscal year 2011. Japan’s energy sector is over dependent on petroleum that is largely imported. Coal, liquid gas, nuclear power and hydropower supplement the country’s energy sectors. In move to control consumption of oil in the economy, the government has introduced car ownership and fuel levies optimized to regulate dependence of petrol. The Japanese service sector accounts for 75% of its total economic output with Japan airlines lying among the largest global companies. Japanese industrial sector also enjoys diversification and enjoys complex technological growth. Despite the poor terrain of the country, Japanese government has invested in agricultural activities that produce 50% of the total country’s food consumption. Japan majorly imports wheat, sorghum and soybeans from US, while sanctioning importation of rice. Japanese economy also depends on US for most of its imports that include products like chemicals, pharmaceuticals, entertainment, commercial aircrafts, medicines, plastics and scientific items. Japanese imports from US reached $60.6 billion in 2010 with export to US of $120.4 billion in the same year. In addition, Japan provides an extensive market for EU’s agricultural exports Source: Japan Economic Watch, 2011 The unemployment rate in Japan hit 4.2% in 2006, but increased to 5.2% in 2009. By the year 2008, Japan had total labor force of 67 million employees with males comprising 60% of the total labor market. Japanese economy has received positive comments from most economists as depicted from its maintained industrial base and huge capital reserves. Japan’s international trade has also increased with a remarkable shift from 91.4 trillion yen in 2001 to 142.7 trillion yen in 2006. In 2008, Japanese economy faced an annual recession rate of 1.79% in the last fiscal quarter. Japanese economy also encountered tuff moments during the global financial crunch that led to fall in domestic demand accompanied by 1.2% contraction in the economy and consecutive economic contraction of 5% in 2009. Currently, Japan records the highest sovereign debt averaging to $10.55 trillion. Source: Japan Economic Watch, 2011. Conclusion From the above analysis of Japan and Brazil, it is evident that the two countries faced series of corrupt political regimes that stalled substantial economic development. In addition, both Japan and Brazil survived under elements of political unrest that eventually resulted to either impeachment or resignation of the top leaders from the government. It is also evident that the greatest element of political systems of both Japan and Brazil lies upon multi-party or coalition form of national government. Economically, the both Japan and Brazil depict stability despite the occasional global depression and recession. Brazil economy has been very stable to an extent that it survived the 2008 global financial crisis even as the developed world staggered from the effects of depression. It is also observable that unlike Brazil, Japan’s economy stands at great threat of natural catastrophes like frequent earthquakes and tsunamis that destroy the country’s economic stability. During the global financial meltdown of 2008, Japanese foreign export depreciated leading to successive negative GDP, while Brazilian economy remained stable with minimal challenges. In addition, it can be seen that Brazilian energy supply depends greatly on hydroelectric power as Japanese rely on petroleum and oil products. Work cited Japan Economy Watch. 2011. Web. 2 Nov. 2011. . US Department of States. Bureau of East Asian and Pacific Affairs. 2011. Web. 2 Nov.2011. Commanding Heights. 2002. Web. 2 Nov. 2011. Brazil Economy Watch. 2009. Web. 2 Nov. 2011. Hamada, Koichi. The Current State of the Japanese Economy: A Macro-Economist’s View. 2009. Web. 2 Nov. 2011. Read More