Relationship between Japans Economic Performance and Political Regimes - Research Paper Example

 Global Political Economics Introduction International or global economy has experienced several fundamental transformations over the past few decades. These fundamental changes generally include increased level of the usage of pioneering technological advancements, globalisation effects, market competition trends and internationalisation initiatives. Moreover, the other changes can be identified in terms of augmentation of internet economy, triumph of democratic capitalism over the aspect of authoritarian communism and reduced function for any state in developing economy (Gilpin, 2001). By taking into concern the aforementioned fundamental modifications that were experienced by the global economy within the political context, it has been apparently observed that global political economy is a field of study relating to social science that endeavours to comprehend different global or international problems or issues. In order to assess the financial performances and political regimes concerning any particular subject matter, it has been apparently observed that the various political activities which are often performed by different nations tend to extensively affect the monetary flows and most importantly, impost strong influences over international trade by a considerable extent (Veseth, n.d.). Based on a similar context, a strong interrelation can be observed as existing between the performance of Japanese economy and the enforced political regimes as well as its economic policies. This is owing to the reason that the government plays a decisive role in developing the financial performances of Japan. While determining the association between Japanese economy and political economic policies enacted by the Japanese government, it has been viewed that the financial advancement of the nation is typically based upon the aspects of private entrepreneurship. Contextually, the Japanese government has supported the country to develop its financial performance in almost every sphere that comprises currency, small business industry as well as infrastructure and technology. However, when serving the population with these developmental facilities, it has been viewed that the government has been confronted with the issue regarding the depreciation of Japanese currency i.e. the Japanese Yen, in its recent performances. Emphasising on this particular aspect, various theorists have argued that the issue concerning the depreciation of the Japanese Yen might affect the global world by a significant extent owing to the effects of international trade (Country Studies US, n.d.). In this paper, the issue concerning the interrelation between Japan’s economic performance and political regimes concerning Japanese Yen will be discussed. Moreover, the global impacts of the depreciation of Japanese Yen will also be addressed in this paper. Relationship between Japan’s Economic Performance and Political Regimes The financial development of Japan has been principally based upon the notion of private entrepreneurship over the past few years. It has been viewed in this background that the Japanese government has made deliberate efforts to directly contribute towards stabilising its financial performances and raising the prosperity of the nation by a considerable extent from a long-run perspective. Major activities performed by the Japanese government have eventually supported the nation towards successfully establishing new industries, mitigating the adverse effects as a result of the recent economic depression and generating ample employment opportunities for joblessness individuals within the nation. Moreover, the actions that were adopted and subsequently implemented by the government also aided Japan towards generating a sound financial infrastructure and most significantly, enhancing the living standards of its residential citizens. It is worth mentioning in this regard that the political system followed in Japan is not similar to any other country which follows a completely democratic framework. With regard to determine the interrelation between the financial performance and political regimes of Japan, it has been apparently observed that the behavioural attitudes of the country towards the role of government have been historically shaped by Confucianism which emphasises largely upon benevolence than loyalty (Country Studies US, n.d.). The government and business relations of Japan have been viewed to be conducted through the execution of various independent channels including the Ministry of Finance and the Ministry of International Trade and Industry (MITI). The Ministry of Finance is held accountable towards performing different operational liabilities concerning fiscal affairs that include the preparation of national budget. Moreover, the Ministry of Finance is also held responsible to initiate dynamic fiscal policies and to design effective monetary policies possessing circuitous control over the Bank of Japan. Apart from the aforementioned responsibilities, the Ministry of Finance also performs the functions of distributing public investments, collecting taxes, designing effectual tax policies and most importantly, controlling foreign exchanges. In the similar context, MITI is held liable for controlling the production as well as the distribution of different products and/or services in Japan. Moreover, MITI possesses certain imperative functions that ultimately contribute towards developing the financial performances of Japan by a greater degree. In this similar concern, the different functions of the MITI encompass regulating foreign trade of Japan as well as administering its international commerce and making sure smooth along with effective flow of different products or services in both national and the global economy. Besides, the other functions of the MITI constitute encouraging the advancement of different industries belonging to Japan such as mining and manufacturing as well as managing and controlling the procurement of energy resources, raw materials and other valuable national assets (Country Studies US, n.d.). It is worth mentioning in this regard that apart from the Ministry of Finance and the MITI, there are certain other channels that have been established with a better association between Japan’s economic performance and political regimes. These channels include the Ministry of Construction, Transportation, Health & Welfare and Ministry of Posts & Telecommunication. In this connection, the Ministry of Construction is held liable for governing all the constructions that are performed in Japan. Similarly, the Ministry of Transportation tends to perform the function of supervising land, air or sea transports within the country to have a record of the resources imported and exported through foreign trades and currency exchanges. Correspondingly, the Ministry of Health & Welfare is held accountable for managing as well as controlling and synchronising the services linked with health and welfare. Last but not the least; the Ministry of Posts & Telecommunication performs the responsibility of looking after postal services along with electronic communications in an effective manner (Country Studies US, n.d.). With regard to determine the financial performances of Japan, it has been apparently observed in this particular context that the financial growth of country has been adversely affected due to the occurrence of natural disasters which include the renovation and rebuilding initiatives following the occurrences of tsunamis and earthquakes. However, the year 2012 has been regarded as a bounce-back year for Japan where the country was able to raise its rate of financial growth by a certain degree (Conerly, 2011). For instance, the Gross Domestic Product (GDP) growth rate of Japan during the period 2010 to 2013 has been viewed to be 4.5, -0.8, 2.2 and 1.2 respectively (IMF, 2012). This could be better understood with the help of the following table. Years 2010 2011 2012 2013 GDP growth rate 4.5 -0.8 2.2 1.2 GDP Growth Rate of Japan (2010-2013): (IMF, 2012) Based on the brief idea about the GDP growth rate of Japan during the years 2010-2013, it is expected to rise further by 0.6 percent and 0.8 percent in the year 2013 and 2014 respectively (United Nations, 2013). Apart from GDP growth rate, the unemployment rate of Japan, during the years 2009 to 2011 has been viewed to be 4.8, 4.8 and 4.2 percent respectively (United States Department of Labour, 2013). With the aim to recognise the interrelation between the financial performance of Japan and its political regimes concerning Japanese Yen, it can be viewed that the country has been positioned into an indefensible pathway of obtaining strong Yen as well as deflation. Furthermore, it is quite likely that the change-over from a stronger to a weaker Yen would considerably affect the financial performance and the overall economic stability of Japan. In this regard, the Japanese government has been observed as inclined towards increasing its expenditure in various segments including purchase of governmental bonds as well as securities and other borrowings. The Japanese currency i.e. Yen has also been noted to be in the position of upward rising trend after experiencing an adverse effect in its economy due to the occurrence of natural disasters and global recession. With regard to determine the association between the financial performance of Japan and political regimes concerning Japanese Yen, it can be apparently observed that the government has been able to grant substantial amounts for conducting several projects aiming towards strengthening the country’s overall performance over the long-run. It has fundamentally been influenced with the rising value of the Japanese Yen and its trend of upward rising in both national as well as international business markets (Sato, 1999). An Overview of the Japanese Currency Yen has often been argued to be one of the most traded currencies throughout the globe. It has smaller presence in the international business markets in comparison with other currencies belonging to different nations such as Euro and Dollar (Twomey, 2011). The rapid development witnessed in the Japanese economy, during the past few years had played a major role to raise its significance in participating actively in the world economy. Moreover, the GDP, capital movements and international trade have also been augmented due to speedy advancement in its economy. As Japan emerged as one of the biggest aggregate creditor nations across the globe, Japanese Yen has also been noted to witness a substantial increase in its significance within the international market. However, it is worth mentioning in this particular situation that even though the country has emerged as one of the leading aggregate creditor nations across the globe, the weight of its currency remains weaker in comparison with Dollar and Euro, which are often categorised as more reputed currencies, in the international business markets. Due to this particular aspect, the scope as well as the rapidity of “Yen internationalisation” has been observed to be quite limited (Kawai, 1996). One of the imperative political economic policies enforced by the Japanese government in order to develop the financial performances of the country has been noted to encourage internationalisation of the Japanese Yen from a futuristic perspective. In this similar context, the Japanese government is intending towards “internationalising the Yen” with the motive of availing various significant benefits. It is worth mentioning in this context that the Japanese government strongly believed that the “internationalisation of Yen” would certainly support the country to enhance different sorts of transactions that encompass capital flows as well as current accounts, foreign exchanges and firm infrastructures among others. Notably, the benefits that can be availed by the “internationalisation of Yen” principally comprise the stabilisation of the nation’s export functions with minimised dependency upon the currencies such as Euro as well as Dollar in the international business markets. It shall also be beneficial for the smooth functioning of fund management of central banks and international investors among others. Moreover, the other benefits of “internationalisation of Yen” encompass increasing effective cross-border transactions, lessening risks linked with foreign exchange, increased capital transactions and most significantly, supporting Japan to enhance its competence level in the global financial markets. Contextually, it has been noted that the Japanese government has been intending towards making deliberate efforts with the desire to adopt as well as implement effectual strategies and therefore, attain the aforementioned objectives concerning “internationalisation of Yen”. In this similar concern, the Japanese government also tends to establish new Yen-denominated instruments as well as markets making easy restrictions, especially on cross-border capital flows in order to accomplish the aforesaid national objectives behind the “internationalisation of Yen” (Takagi, n.d.). Impacts of the Depreciation of Japanese Yen in the Global World After experiencing a tough situation owing to the occurrence of global financial downturn recently in the year 2008, the Japanese economy is currently facing another tough challenge i.e. a speedy depreciation or decline in the value of its Yen. It has been apparently observed with reference to the statistical survey reports concerning the trend of currency value that Yen has weakened quite sharply as compared to other nations’ currencies like Euro or Dollar over the first months of 2013. According to various researches, an inappropriate and an ineffective adoption as well as implementation of strategies related to monetary policy concerning both international and national trade relations is considered to be one of the primary reasons for the depreciation of the Japanese Yen. Moreover, apart from the execution of unsuitable and unproductive monetary policies, developments in diverse fields in abroad are also regarded as the other chief contributory factors to cause depreciation of the Japanese Yen. To be specific, the Japanese Yen has been viewed to be incessantly losing its value or depreciated since Japan declared its decision regarding the conduct of general election (The Central News Agency, 2013). After acquiring a brief idea about the reasons behind the weakening or depreciating value of the Japanese Yen, it can be affirmed that this particular concern imposes considerable impacts on the global economy by a greater degree. It has further been viewed in this regard that the depreciation of the Japanese Yen imposes both positive as well as negative impacts on the global economy. For instance, when assessing the positive impacts of the depreciation of Japanese Yen in the global world, it can be viewed that the Japanese exporters are much pleased to view the decline or depreciation of the Japanese currency as they strongly believe that this would help in obtaining greater profits by exporting trade functions. In accordance with the reports published by various financial analysts, it has been apparently observed that the decline or the depreciation of the Japanese Yen would impose positive impacts upon different countries such as Indonesia, Malaysia, Thailand and China among others which are linked with the economy in terms of international trade and tend to share similar or rather interlinked currency policies. This is owing to the reason that these particular nations attempt to conduct extensive import functions by trading heavy machineries, equipments, vehicles parts and instruments along with other similar products from Japan in particular. Moreover, the positive impacts of the depreciation of the Japanese Yen in the global world can lead towards experiencing superior financial growth rate and enhancement in the current account discrepancy of Japan. Besides, the global economy would be benefitted from the depreciation of the Japanese Yen owing to the reason that such decline is quite likely to lead towards an augmented national demand for exports assuring the attainment of better quality products at reasonable prices and smooth inflow of foreign currencies in the economy. Moreover, the depreciation or the devaluation of Japanese Yen would eventually support the global economy from a positive note in terms of rising international demand for the Japanese domestic products and/or services, high financial growth through lessening unemployment rates and augmenting international trade relations along with encouraged investments (Yongding, 2002). Apart from the above mentioned positive impacts, the devaluation of Japanese Yen is also quite likely to impose certain negative impacts on the global economy. It can be observed in this context that the depreciation of Yen is not likely to prove as much beneficial for Japan taking into concern certain imperative aspects. For instance, the decline or the depreciation of Japanese Yen shall act as a barrier to augmenting export functions creating a deficit and a gap between the internationally increasing demand and the nationally produced commodities. It is also likely to restrain imports which would eventually affect the Japanese economy as a growing market in the global realm. Additionally, even though the depreciation of Japanese Yen can lead towards augmentation particularly in the net exports of the economy, it will fail to contribute in terms of the GDP growth rate of Japan and therefore act as a hindrance to the overall economic prosperity. In the long run, continuation of such devaluation of Yen may also result in deflation or economic depression owing to the rise in the domestic price of commodities and falling inflation rates. It is worth mentioning in this context that the depreciation of the Japanese Yen might also restrict in selling government bonds and securities of Japan which would result in weakening the financial system of the country at large (Yongding, 2002). With regard to determine the negative impacts of the depreciation of the Japanese Yen, it has been viewed that more than the global economy, Japan might have to face certain difficulties concerning the aforementioned issue. In this similar context, the difficulties or the challenges comprise experiencing the situation of probable deflation in the long run with the continuously lessening of the citizens’ buying power, decreasing shareholders’ value and rising demand for the increasingly lowering value of the domestic products exported in the international markets. From the perspective of negative impacts concerning the depreciation of the Japanese Yen, it has been viewed that the motorcycle as well as the power business in Japan has been largely affected due to the continuous depreciation of Yen. In this regard, the unit sales of the aforementioned businesses have declined substantially in terms of rising prices in raw materials resulting from the depreciation of Yen (Gulf Times, 2013). Hence, it can be affirmed that the sharp Yen devaluation has largely contributed towards the outburst of an undeclared currency war between Japan and other countries with their currencies noted in the top lists. Conclusion The perception of global or international political economy is principally regarded as a multi-disciplinary approach that affects monetary flows and international trade by a considerable extent. Contextually, it is the government of any particular nation who attempt to play a decisive role in formulating effective policies aiming at strengthening economies by a greater degree. In this regard, it has been apparently observed that there exist a strong interrelation between Japan’s economic performance and political regimes. This is owing to the reason that the Japanese government performs certain effectual activities for which the country has been able to establish new industries, mitigate the unfavourable effects resulting from economic depression and generate ample employment opportunities for jobless individuals. The financial performance of Japan has been thus noted to be in a turmoil situation since the outbreak of the global recession. However, the year 2012 can be regarded as a bounce-back year for the country due to its adoption as well as implementation of effective fiscal and trade policies. Yet, these policies have been argued to result in severe currency depreciation which if continued, may cause significant obstruction to the economic prosperity of Japan over the long run. Notably, the depreciation Japanese Yen imposes both positive as well as negative impacts on the global economy. For instance, the weakening of the Japanese Yen is likely to support the exports by increasing the international demand for the commodities. On the contrary, the currency devaluation in Japan can also result in restricting the selling of government bonds as well as securities. Accumulated with the rising unemployment situations along with an increasing cost of living within the economy, the devaluation may also cause deflationary consequences in the long run period. Thus, it can be concluded that the depreciation of the Japanese Yen needs to be considered with greater significance to preserve the growth rate of the country from a long run perspective. References Country Studies US. (n.d.). The role of government and business. Japan. Conerly, B. (2011). Japan's economic forecast, 2012-2013: a business perspective. Retrieved from http://www.forbes.com/sites/billconerly/2011/12/21/japans-economic-forecast-2012-2013-a-business-perspective/ Gilpin, R. (2001). Global political economy. United States: Princeton University Press. Gulf Times. (2013). Business. Retrieved from http://www.gulf-times.com/business/191/details/344112/global-currency-war-unlikely-despite-yen-depreciation%3A-qnb IMF. (2012). Asia and Pacific regional economic outlook––October 2012 update. Regional Economic Outlook. Kawai, M. (1996). The Japanese Yen as an international currency: performance and prospects. Denmark: Kluwer Academic Publishers. Sato, K. (1999). 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