What Was the Basis of Japans Economic Growth in the Post-WWII Period - Assignment Example

Questions on Activity Student Name Institution Name Course Name Date Questions on Activity: Question 1: What was the basis of Japan’s economic growth in the post-WWII period? The economic expansion of the post-WWII period also known as the Golden Age of Capitalism covers economic prosperity registered in the mid-20th century after the 1945 World War II. The post-war boom continued until the 1970s in which the world recession occurred affecting many developing economies. Countries registered different levels of growth during the time with the East Asian and Western European countries growing at unusually sustainable and high rates accompanied by full employment. The development of Japan among these countries led to its consideration as the post-war economic miracle considering the effects of war had a significant impact on the country. Japan's miracle development was based on numerous factors that included its economic relations cemented by prudent alliances and emulation of the Western model among other factors. Strategic Alliances The economic growth of Japan in the post-WWII period was achieved through the formation of strategic partnerships with the Western block. Before the war, Japan and the U.S were enemies. After the war, an alliance between the two spearheaded positive relations that encouraged economic development. In 1952, their leaders creating a binding relationship of economic benefit to both countries signed the Security Treaty between the two nations (Mauch & Sugita, 2007). The Ministry of International Trade and Industry also played a central in building these alliances considering its contribution to the development of policies. Their policy relating to Industrial Rationalization passed in 1950 worked towards creating local partnerships between the government and the private sector creating a coordinated approach to industrialization and development. Western Model During the late 1800s, the western states were considered the models symbolizing economic growth (Moss, 2006). These through their civilization and industrial modernization facilitated a boom in the economy. Japan’s re-entry into the international community promoted the development of their international ties that facilitated growth. Japan focused on improving its policies to improve relations with the international community through friendly refugees, immigration, citizenship and naturalization laws that indicated to the international community its commitment to enhancing their relationship with it. Japan used this approach to emulate the western economies in building its policies hence creating a lasting relationship that facilitated economic development. Golden Sixties The development during the time to 1961 made a base on which the Golden Sixties referred to as Japan's second decade of an economic miracle were advanced. Japan's nominal GDP grew further from the $91 billion registered in 1965 to $1.065 trillion as of 1980 (Roychoudhury, 2013). The development of the economy during this time beat the economic recession of the 1970s, which proved possible through the leadership of Prime Minister Ikeda that was a former minister in the Ministry of International Trade and Industry. Under his leadership, the government set its target on an income-doubling plan facilitated by low taxes and interest rates that supported private sector spending. The government expanded its investment in the infrastructure of the country developing highways, subways, airports, high-speed railway systems, ports, and dams that facilitated trade and the development of export activities. The government also expanded the communication sector further promoting trade activities. Ikeda pushed for trade liberalization that grew the imports and export aspect of the trade. Despite the devastating effects of the World War II to Japan, the country rose above these and registered strong economic development fostered by strategic alliances, adoption of the western model and strong governance that resulted in the golden sixties economic effect. Question 2: What lessons might India and China draw from the experiences of the Asian Tigers, and from the Asian Financial Crisis of 1997/8? The Asian Financial Crisis of 1997/8 was marked by significant financial contagion effects that gripped much of the East Asia countries starting in Thailand spreading through to other countries like Indonesia, South Korea, Hong Kong, Malaysia, Philippines and Laos among others. It resulted in slumping currencies affecting the stock markets and the value of other assets leading to a rise in the private debt. The slump in currencies resulted in an increase in the foreign ratios of debt to GDP from 100% to 167% affecting four of the largest members of the Association of Southeast Asian Nations leading to their economies rising above 180% later (Kennard & Hanne, 2015). These changes affected the economic status of the Asian Tigers leading to increasing fears of the crisis spreading to other countries occasioning a financial crisis worldwide. Valuable lessons from this crisis play a significant role in ensuring such an experience is averted in other nations including India and China. Some of the lessons include the following: The major challenge that many countries faced during the crisis was the management of their currencies affected by their exchange rate regime. China and India need to maintain prudent policies in this regard embracing flexible rate regimes that will facilitate reduced mismatches between the banking assets. The two governments need to keep a ratio above one for their holdings in foreign exchange reserves and its short-term liabilities (Krueger, n.d). The effect of this includes controlling the banking assets maintaining them in a denomination of a domestic currency while the liabilities are held in foreign currencies. The approach boosts the strength of the currencies of the countries, in turn, improving its ability to withstand external shocks from other currencies. The occurrence of the Asian crisis was influenced by the problems that many of the countries besides Japan faced in managing their banking system. Adopting flexible and modern exchange rate approaches and competitive financial markets will ensure China and India remain cushioned from suffering such a crisis. The composition of the different capital inflows that the country embraces matter in sustaining a currency of any state was another lesson learned from this crisis. During the times, many of the affected countries did not regulate their capital inflows hence opening room for chances of imported inflation. The countries also learned that transparency and information were vital in sustaining the financial markets and the entire economy. The availability of information on the currencies and occurrences of other economic activities will yield to improved chances of managing the exchange rates. It is from the sharing of information that lessons on the need to raise interest rates and provide lower exchange rates resulted (Glick & Hutchison, 2011, September 15). If both China and India embrace this approach to their foreign exchange policies, they strengthen their economy and currencies hence boosting economic development. The governments of any country play a significant role in controlling the exchange rates and economic activities within its territory and its relations with the international community. According to Wolf, (2007, May 23), the world economy largely depends on the generation of large current account surpluses at a time when another person runs on deficits. It is, therefore, the role of the government to provide policies that determine the nature of relations of the country on an economic level to ensure it remains on surplus current accounts rather than run on deficits. References E., V. S., Mauch, P., & Sugita, Y. (2007). Historical Dictionary of United States-Japan relations. Lanham, MD: Scarecrow Press. Glick, R., & Hutchison, M. (2011, September 15). Currency Crisis. Obtained from http://www.frbsf.org/economic-research/files/wp11-22bk.pdf Kennard, F., & Hanne, A. (2015). Boom & Bust: A Look at Economic Bubbles. Hershel / Williams. Krueger, A. O. (n.d.). Lessons from Asian Financial Experience. Asia and the Global Financial Crisis, 93-114. Obtained from http://www.frbsf.org/economic-research/files/Krueger.pdf Moss, D. (2006). Gender, space and time: Women and higher education. Lanham: Lexington Books. Roychoudhury, H. (2013). My Journey & Sovereign United Bengal. Partridge Pub. Wolf, B. M. (2007, May 23). The lessons Asians learned from their financial crisis - FT.com. Retrieved September 11, 2016, from http://www.ft.com/cms/s/0/efb6e612-08ca-11dc-b11e-000b5df10621.html?ft_site=falcon Read More