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No. 44 — November 20, 1998

JEI Report will not be published November 27, 1997 because of the
Thanksgiving Day holiday. The next issue will be dated December 4, 1997.

While we take a printing holiday,
keep up-to-date on breaking Japan-related developments
by visiting the
JEI Spin On The News page

Feature Article

STRUCTURAL CHANGE AND ECONOMIC MOBILITY IN JAPAN by Arthur J. Alexander

Summary

A common myth about Japan is that its labor force is immobile and that industry is still doing business the old way. However, an examination of measures that capture shifting patterns of employment across industries and gross domestic product reveals that structural change in Japan is almost indistinguishable from what is happening in the United States the presumed paragon of economic mobility.

Accession and separation rates for the two countries are quite similar. Turnover in smaller Japanese establishments is as high as 25 percent a year. At 20 percent, the rate for larger establishments is only somewhat lower. Further evidence of the Japanese economy's flexibility is its adjustment to the loss of 86,000 manufacturing firms and more than 1.2 million manufacturing jobs between 1991 and 1996.

America's adjustments to changes in demand and output typically are manifested in fluctuations in the size of the labor force. In Japan, the number of employees is more stable. Adjustments there are managed through variations in the number of hours worked and in remuneration. However, with economic stagnation and even recession characterizing the 1990s, employment is declining. Just in the first eight months of 1998, some 800,000 people were cut from the job rolls.

Japanese businesses are strong proponents of stable employment and practice it when they can. Their actual behavior across several dimensions of performance, however, conforms to the demands of economic forces. In short, when it comes to jobs, companies in Japan are not that different from their American counterparts.

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Weekly Review

JEI Report will not be published November 27, 1997 because of the
Thanksgiving Day holiday. The next issue will be dated December 4, 1997.

While we take a printing holiday,
keep up-to-date on breaking Japan-related developments
by visiting the
JEI Spin On The News page

TOKYO'S LATEST RECORD STIMULUS PACKAGE GETS COOL RECEPTION by Jon Choy

Holding true to earlier promises and fighting to regain the confidence of voters and financial markets, the government of Prime Minister Keizo Obuchi rolled out an unexpectedly large package of economic stimulus measures that it claims will put Japan back on a positive growth track within two years. The plan, the cabinet said after approving it November 16, is worth an estimated ¥23.9 trillion ($177 billion at ¥135=$1.00), easily topping the previous record ¥16.7 trillion ($123.7 billion) package announced just this past April (see JEI Report No. 17B, May 1, 1998). The Economic Planning Agency calculates that the new initiatives will lift the economy's real growth by more than 3 percentage points over the next 12 months, enough to push the change in price-adjusted gross domestic product back into the black for all of the next fiscal year, which begins April 1, 1999.

 

JAPAN'S CURRENT ACCOUNT SURPLUS HEADED FOR NEW RECORD by Douglas Ostrom

The surplus in the broadest measure of Japan's trade — the current account — soared 57.3 percent in the July-September period (see Table 1). The external imbalance was the biggest on a quarterly basis since the Bank of Japan changed data collection procedures starting with the 1993 figures. However, few analysts, if any, ventured metaphors like "juggernaut" to describe the state of the economy that produced such results.

 

APEC'S SQUABBLES OVER TRADE, POLITICS OVERSHADOW U.S.-JAPAN AID PLAN by Eric Altbach

Despite the announcement that Washington would join Tokyo in a $10 billion financial aid initiative to help troubled East Asian economies, the Asia Pacific Economic Cooperation forum's annual ministerial meeting and summit in Kuala Lumpur, Malaysia were marked by the failure to conclude a key trade-liberalization agreement. Moreover, even the appearance of unity among APEC members was disrupted when a speech by Vice President Al Gore chiding the Malaysian government for political repression sparked a series of harsh exchanges between American and Malaysian officials. The November 14-15 ministerial meeting and the November 17-18 summit had been billed as an opportunity for APEC's 21 members to reverse the slowing momentum of the trade-liberalization process and to address collectively the continuing effects of the regional economic crisis.

 

OBUCHI, YELTSIN AGREE TO CLOSER COOPERATION ON ECONOMIC, TERRITORIAL ISSUES by Barbara Wanner

For the first time in five years, Japan and Russia have issued a formal statement that commits both countries to closer cooperation on economic, political and territorial issues and sets 2000 as the target year for conclusion of a peace treaty. At the November 13 wrap-up of their three-day summit at the Kremlin, Prime Minister Keizo Obuchi and President Boris Yeltsin agreed to establish two subcommittees to facilitate conclusion of an accord that officially would end World War II. One group will focus on drawing a new border between Japan and Russia that addresses both countries' claims to four Kuril islands northeast of Hokkaido that the former Soviet Union seized in 1945 at the close of the war. The other panel will examine joint economic activities on the disputed islands — Etorofu, Kunashiri, Shikotan and the Habomai group — known in Japan as the Northern Territories.

 

NOTES

Frustrated by high unemployment and generally depressed economic conditions, Okinawans rejected incumbent Masahide Ota in favor of his opponent, Keiichi Inamine, a local business leader, in the November 15 gubernatorial election. Of the impressive 77 percent of eligible voters who flocked to polling stations, 374,833 cast their ballots for Mr. Inamine, while 337,369 voted in favor of Mr. Ota serving a third four-year term.

At the November 14 conclusion of a marathon two-week negotiating session in Buenos Aires, Argentina, delegates from 160 nations agreed on a schedule to hammer out the myriad details required to implement a 1997 pact to counter the threat of global warming by controlling emissions of so-called greenhouse gases. Last December's Third Conference of the Parties to the United Nations Framework Convention on Climate Change (COP3 for short) was held in Kyoto and produced commitments from Japan, the United States and 36 other industrialized countries. Their goal is to lower emissions of six gases thought to affect the earth's climate by an average 5.2 percent below what each country produced in 1992 by sometime during the 2008-12 period.

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