The Economy of Germany and Japan - Example

The Economy of Germany and Japan By Student’s Name Code+ course name Instructor’s Name University Name City, State Date The Economy of Germany and Japan Introduction Unemployment in most countries has been a factor of monetary and macroeconomic policies adopted by various economies (Fumuo, 2004). However, some internationally linked economic situations such as the great recession have been a major impact as far as stability of economies is concerned. It has also been identified that the unemployment rates in specific economies are responsible for causing inflation. In many instances, economists have used the Philips curve to present this argument important factors that are linked to the two parameters include the rates of change in a trade-off in money wages and unemployment. This kind of approach has also been used in several countries to forecast economic situations from previous employment and inflation situation. Effects of unemployment and inflation are likely to affect countries from different economic regions in varying ways. This article will delve into the analysis of two countries Japan and Germany. Inflation in Germany and Japan Germany is one of the countries that have managed to achieve almost full employment to date. The unemployment rate of Germany is at 5 percent, which is an improvement from the 7 percent witnessed during the great recession. Many questions have been raised on the reason why the employment situation in Germany has increased. Some explanations can be provided for the situations that lead to the decline of unemployment in the European economy. Decreasing working age population, high growth rate, and rising wages have been cited as a factor. Since 2005, a significant drop in the unemployment number in Germany has reduced from 11.4 percent to 5.4 percent (Jeane-Maries & Sala, 2013). During the great recession in 2008 and 2009, the unemployment rate was predicted to increase after it Germany had significantly reduced the number of unemployed citizens since 2005. The decrease in unemployed then reduced considerably after the great recession. The curve is, therefore, peak during the great recession when the global economic meltdown affected many economies including Germany. The role of policies before and after the recession was very important in determining the outcome of employment statistics. Many companies and employment sectors were adversely affected by the great recession, but the resilience after the economic turmoil has seen the employment sector in Germany record enormous improvement. The ages presented in the graph are different and portray how differently the employment situation in Germany. According to Ott-Laubach & Schoenwald (2014), in Japan, inflation has been on the rise after the great recession of 2007-2008. However, the impacts of the recession were not as large as the ones witnessed during the recession after the Second World War. Most economists have been concentrating on some factors that have contributed to the rising inflation since 2012. The rate is expected to continue dropping after positive results were recorded in towards the end of 2013. The current deflation in Japan is alarming, and so far, Japan targets a new inflation rate of 2 percent. Philips curve for the case of Germany and Japan The Philips curve is a model that can be used to indicate the empirical relationship that exists among the inflation rate, unemployment and the rate of change of labor force. The curve has been used in various economies such as Japan after the formulation of the model in 1958. A Philips curve was developed by Kitov and Oleg (2013), after retrieving data fro the bureau of statistics and the department of internal affairs. The scholars used a wide variety of data that described the demographic characteristics of Japan. In Japan, the inflation rate has been moderate with the increase and decrease witnessed on various occasion. However, the inflation rate increased in 20088 during the great recession but later went down after the recession. In Germany, the Philips curve cannot be the same as the one witnessed in Japan. As stated the employment situation in Germany has greatly increased to a point that only 5 percent of the Germans are unemployed. The prediction of the unemployment situation is likely to improve as the situation has experienced positive trends in the last decade. Macroeconomic policies in Germany and Japan In Germany, several policies have been developed after the great recession, which has been responsible for the improved employment situation. The labor market has been subjected to some reforms whose genesis can be tracked down to 2003. The first reform in Germany that was proposed by Hartz involved relaxation of the anti-redundancy and tightening the conditions needed for access to the benefits linked to unemployment. The reforms also aimed to support the vocational education and strengthening impermanent employment. The reforms were brought into the German economic phase in 2003. The second component of Hartz reforms came on April 1st, 2003, and it involved the creation of a single gateway for the unemployment as well as a job center. There was a need to create a link between the federal employment agency and the body mandated with managing social funds in Germany. Furthermore, the procedures attached to the creation of enterprise were relaxed, and the targeted group was the unemployed. Administrative procedures were considerably simplified especially for the jobs considered as insecure in Germany. The result saw the creation of the mini-jobs as well as the midi-jobs, which were treated differently. Since mini-jobs were poorly paid, this category was exempted from some social contributions. However, the taxation for the employer was at a rate of 27 percent, which also meant that these people were exempted from some social entitlements. The midi-jobs was operated at a higher level than the mini-jobs regarding social contributions and social employment. The third reform by the Hartz reforms saw the reorganization of the national employment agency on January 1st, 2004. Later in 2005, several reforms were made on the terms and conditions of the social benefits through tightening of unemployment insurance. Germany also opted to make reforms on pension system and increased the retirement age from 60 years to 67 years. After the great recession of 2008, reforms such as short-time working were introduced in Germany. The aim of the move was to reduce the rate of penalizing the business firms while maintaining competent labor. Local employment agreements were considerably improved, which the trade unions controlled. Financial sanctions were imposed on companies that failed to abide by the local employment agreements. In Japan, several economic parameters have been used for the last ten years to model the inflation and unemployment situation. For the past 20 years, the Japanese economy has recorded on of the lowest unemployment rates in the industrialized country. Inflation and unemployment in Japan have been very convincing among the developed countries. Asian economic giant has recorded one of the most compelling economic growths in the world. The inflation in Japan is expected to reduce as new economic policies are proving to be efficient as far as moderation is concerned. One of the policies that Japan used from 2002 included concentrated on liquidation of the loans considered as non-performing (Fumuo, 2004). New subsidies were created to encourage firms to re-employ and employ new staff. A special emergency fund was created developed that alongside special measures to help the transfer of workers to firms of specialization. The economy also opted to offer career counseling and dispatching officer counselors from the public sectors to offer free vocational training. Several measures were also put in place to ensure that new jobs were created. The use of the special emergency subsidies was very useful and efficient in creating new Jobs. Labor supply was revitalized and relevant adjustments made in the private sector that was also efficient in forcing a way for new employment opportunities. Rules in Japan relating to the limited employment contracts and the discretion of labor systems were revised. Another important area that was revised in Japan were the employment insurance system, which allowed issues of interests to be adequately addressed. The response to displaced workers involved offering loans for meeting living expenses and encouraged re-employment. Policies relating to skill development were also developed to ensure that there was the availability of skilled labor in Japan. The Japanese dual system was introduced with an intention of improving employment of the young people. Policy reforms ensured that all categories of employees in Japan were entitled to allowances. Conclusion Employment and inflation are critical economic factors that can be used to predict the trends in economic prosperity. As the relationship between the two may not be direct, the economist has established models that can combine the two parameters to predict economic growth of a country. Japan and Germany are two economies that have been affected by economic recessions in 2007-2008. The Philips curve is a unique model that can be used to predict the economic future of both Japan and Germany. This article has presented the situations in the two economies as far as unemployment states are concerned, and the policies used to help the economies solve the problems in the two economies. The Philips model can be used by economic policy makers in the respective countries to develop the key economic policies. Bibliography Fumuo, O., 2004, Structural Unemployment Measures in Japan. Retrieved from http://www.jil.go.jp/english/JLR/documents/2004/JLR02_ohtake.pdf Jeane-Maries, D., & Sala, M., 2013, Why did the unemployment rate keep on falling in Germany after 2007? Retrieved from Special Analysis: http://www.insee.fr/en/indicateurs/analys_conj/archives/march203_d1.pdf Kitov, I., & Oleg, K., 2013, Inflation, Unemployment, and Labor Force: The Phillips Curve and Long-term Projections for Japan. Retrieved from Institute for the Geospheres Dynamics, Russian Academy of Sciences: http://www.cepr.org/sites/default/files/events/papers/1814_KITOV%20-%20The%20Phillips%20Curve%20and%20Long-Term%20Projections%20for%20Japan.pdf Ott-Laubach, P., & Schoenwald, S., 2014, Focus on Economics: Japan has not (yet) Failed. Retrieved from KFW Economic Research: https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-Nr.-77-Dezember-2014-EN.pdf Read More