NO. 11 &emdash; March 21, 1997


Feature Article


The Japanese government is making a strong move to increase funding for basic research and to enhance the scientific output of universities and other research institutions. Studies of research and economic performance provide a solid rationale for this policy.

For starters, basic research is having an increasingly large impact on the economic activities of advanced industrial nations. Academic research, in particular, strongly affects competitiveness in cutting-edge technologies. As revealed by patents and innovation patterns, however, Japanese companies seem to be less tied into such scientific activities than their American counterparts. One reason is that, despite the overall scale and vigor of Japanese research, its contributions to world science are less than the resources devoted to it would lead one to expect. In addition, Japanese universities face legal and institutional constraints on providing scientific assistance to the business community.

Basic research funded by both private and public sources plays a key role also in advancing productivity &emdash; within firms, industries and entire nations. However, geography and borders matter. Proximity within prefectures, states and countries strongly affects the relationship between science on the one hand and productivity, patents and industrial research on the other. The logic of these findings implies that, if Japan is to derive the benefits of research in promoting productivity and the economy's growth, Tokyo will have to nurture basic research at home and take other policy steps, such as improving financial access for science-based ventures, to facilitate the transfer of the results of that work to the economy.

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Weekly Review

Japan's Economy Finished 1996 On A Strong Note by Douglas Ostrom

Perceptions die hard. That explanation is the only credible one for the widespread use on both sides of the Pacific of adjectives like sluggish to characterize the Japanese economy in early 1997. According to Economic Planning Agency data released March 13, Japan's economy preliminarily grew a price-adjusted 3.6 percent in 1996, the best showing among the Group of Seven large industrial nations. Furthermore, it began this year with the benefit of a strong tail wind since real gross domestic product expanded 3.9 percent on an annualized basis in the last three months of 1996.


Hashimoto Fills Diet's Docket With Reforms by Jon Choy

Prime Minister Ryutaro Hashimoto and his Liberal Democratic Party campaigned in last fall's elections for the lower house of the Diet promising to revitalize the economy and restore consumer confidence through regulatory and administrative reform. Mr. Hashimoto's cabinet made a down payment on these election pledges in the first half of March by submitting to the Diet seven pieces of legislation that pave the way for changes in six areas.


USTR's 1997 Trade Agenda Rich In Rhetoric, Short On Specifics
by Christopher B. Johnstone

The Clinton administration's report to Congress on the nation's trade policy agenda for this year mixes rosy descriptions of White House accomplishments over the last four years with expansive assertions about the importance of trade in shaping America's future prosperity. In addition to laying out an ambitious, if ill-defined, list of goals for 1997 &emdash; from securing passage of fast-track trade negotiating authority to exploring bilateral free trade agreements with several Asian Pacific economies &emdash; the document places special emphasis on the perceived threat to American business interests from Japanese and European competition in emerging markets. However, the "zero-sum" language that the report uses may reflect an increasingly obsolete mind-set that could undermine the achievement of U.S. trade policy objectives.



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