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No. 14 — April 9, 1999

 

Feature Article

JAPAN'S USE OF ITS SCIENCE AND RESEARCH: ROOM FOR IMPROVEMENT by Arthur J. Alexander

Summary

Despite the scale and overall competence of its research and development effort, Japan is not obtaining many of the potential benefits. The country's R&D expenditures are second only to those of the United States. When the volume of this spending is adjusted to the size of the two nations' economies, Japan, in fact, outspends the United States by a small margin. Moreover, business R&D as a percentage of sales has been above the U.S. level in the 1990s.

Compared with the United States, however, Japan lags in the application and the commercialization of science. Numerous studies conducted over the past decade have documented the increasing importance of the ties between science — especially basic research — and an economy's performance. Although any one of these studies can be faulted for inherent deficiencies in data and methods, the similarity of results coming from such a wide variety of information sources and approaches is significant.

The story told by a score of studies and a growing body of data is captured by the following points.

Japan's economy is not achieving high returns on its substantial R&D expenditures for several reasons. First, the research itself is relatively weak. Second, law and custom restrict the relationships between university and industry personnel. Third, ties to the international scientific community through such means as doctoral studies, teaching and coauthorship are limited. Finally, corporate Japanese tends to be excessively inward-looking in its use of science. Unless these problems are overcome and Japan begins to make better use of its considerable scientific resources and talent, the nation's technological advances and future productivity growth could be hampered.

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Weekly Review

TANKAN PAINTS MIXED PICTURE by Douglas Ostrom

Every three months, the Bank of Japan puts a series of questions to a sample of the nation's firms. The results, collectively known as the tankan (or short-term survey of enterprises), are eagerly anticipated as a barometer of business sentiment and as a guide to future central bank policy. Respondents are under no obligation to be consistent in their answers, of course. The latest survey, conducted in March and released April 5, demonstrated that reality.

 

TOKYO STOCK MARKET ON THE REBOUND? by Jon Choy

The January-March period is an anxious time for Japanese equity markets. It is the last quarter of the fiscal year and, thus, critical to the annual financial reports of domestic companies. At close-of-business March 31, accountants begin the task of figuring out business results for the previous 12 months and the total value of companies' assets as of that day. Because financial and nonfinancial firms in Japan own substantial amounts of stock, executives customarily track share prices much more closely in the days leading up to the end of the fiscal year. This year was no different.

 

JAPANESE, RUSSIAN OFFICIALS AT ODDS OVER KOSOVO, TERRITORIAL DISPUTE by Barbara Wanner

Standing firm beside the United States and its European allies, Japan responded negatively April 1 to Russia's latest Balkan peace initiative: an emergency meeting of the Group of Eight nations to discuss a political settlement to offer war-torn Yugoslavia. Foreign Minister Masahiko Komura told visiting Russian Deputy Foreign Minister Grigory Karasin, who relayed the proposal on behalf of President Boris Yeltsin, that while Tokyo welcomed Moscow's peace-oriented diplomacy, "a consensus among G-8 countries [on a Kosovo solution] is unlikely at this point."

 

ASIA-EUROPE MEETING SEEKS TO STRENGTHEN REGIONAL TIES by Marc Castellano

Foreign ministers of the Asia-Europe Meeting, a 25-nation group established in March 1996 to strengthen ties between the two regions (see JEI Report No. 9B, March 8, 1996), gathered in Berlin March 28 and March 29 to discuss a range of security, political and economic issues. Topping the agenda were the North Atlantic Treaty Organization's air strikes against Yugoslavia. German Foreign Minister Joschka Fischer, chairman of the meeting, called on Yugoslav President Slobodan Milosevic to concede, emphasizing the NATO position that he alone holds the key to ending the conflict. At the same time, though, some Asian participants pushed for a peaceful solution to the hostilities.

 

NOTES

The release April 1 of the 1999 National Trade Estimate Report on Foreign Trade Barriers, the White House's annual inventory of country-specific obstacles to corporate America's global business expansion, launched a new Super 301 cycle — and a fresh round of criticism from Tokyo about Washington playing fast and loose with international trade rules. President Clinton set these events in motion by signing an executive order the same day that reinstated for a three-year run Super 301, the powerful offspring of controversial Section 301 of the 1974 Trade Act (see JEI Report No. 5B, February 5, 1999). The April 1 executive order also renewed for three years Title VII, another expired provision of the 1988 Omnibus Trade and Competitiveness Act that targets discriminatory government procurement practices.

The United States has given Japan until June 4 to take "credible measures" to lower what the Clinton administration considers to be the internationally high fees that Nippon Telegraph and Telephone Corp. charges competing local and long-distance carriers to connect with its network. The same deadline applies to facilities-based carriers gaining the right to freely lease capacity to expand their operations. These demands, which the Office of the U.S. Trade Representative issued March 30, were the result of this year's review under Section 1377 of the 1988 Omnibus Trade and Competitiveness Act of foreign follow-through on bilateral telecommunications trade agreements and, especially, the World Trade Organization telecommunications services accord, which took effect in February 1998.

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