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Export dynamics of Japan, Korea and China

Exploring the Causes and Remedies of Japanization

Kyu-Chul Jung

Kyu-Chul Jung examines how Korea’s export market today resembles Japan’s since the 1990s and faces increasing competition from China. In the 1990s Japan lost export market shares as Korea began to catch up, but China began to catch up with Korea in the late 2000s. The old strategy of exporting the same goods as advanced countries is not sustainable. With its limited resources, Korea needs to concentrate on exports where it has a comparative advantage, to undertake structural reforms (dealing with insolvent enterprises and improving labor-market flexibility) and to develop new export markets. Korea needs to focus on core capabilities, so that China and other latecomers cannot easily emulate Korea’s technology and market strategy.

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Economic Stagnation in Japan

Exploring the Causes and Remedies of Japanization

Edited by Dongchul Cho, Takatoshi Ito and Andrew Mason

Japan’s dramatic transformation from economic success to economic stagnation offers important policy lessons to advanced countries everywhere that are struggling with stagnation. The term ‘Japanization’ is often used by economists to describe long-term stagnation and deflation. Symptoms include high unemployment, weak economic activity, interest rates near zero, quantitative easing, and population aging. In the global context, what can governments do to mitigate the downward trends experienced by Japan? This judiciously timed book investigates in depth the causes of Japan’s ‘lost decades’ versus the real recovery achieved by the United States, and the lessons that can be learned.
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Deflation and monetary policy

Exploring the Causes and Remedies of Japanization

Barry Eichengreen

There is little agreement about deflation as a problem for economic growth and financial stability. Economists may question it as a transitory phenomenon or whether monetary policy can solve it without more serious risks. Historical experience generally confirms that it should be a central-bank priority and does not solve itself. Once deflation is under way, monetary policy can return inflation to positive target levels. If that is not achieved, banks need to do more. If doing more threatens financial stability, macroprudential tools are appropriate. If a central bank runs out of government securities to buy or worries about liquidity in the government bond market, there are other assets to buy. If it worries about purchasing other assets, a helicopter drop of money is an option. If that drop targets productive public infrastructure investments, they not only can proceed without increasing public debt but also can actually reduce it.

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Avoiding another “lost decade”: what role for fiscal policy?

Exploring the Causes and Remedies of Japanization

Jerry Schiff and Ikuo Saito

Recent global economic stagnation has stimulated debate about the role of fiscal policy in supporting growth, notably through infrastructure spending. Japan’s experience during its “Lost Decades” provides insights on maximizing the impact of fiscal policy during downturns. First, while Japan provided early and effective fiscal stimulus, later fiscal policy was conducted in a “stop-and-go” and often pro-cyclical manner. Second, a shift in spending away from infrastructure toward transfers reduced the overall fiscal multiplier. Third, a decline in the efficiency of public investment—partly reflecting weaknesses in fiscal institutions—also reduced the impact of fiscal policy. Fourth, the concurrent dramatic shift in demographics reduced potential growth and limited fiscal space, so that fiscal policy was fighting against a strong tide. Avoiding similar problems can help countries design effective fiscal policy responses in the current economic environment.

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Aging and housing prices: the cases of Korea and Japan

Exploring the Causes and Remedies of Japanization

Inho Song

Inho Song examines aging as a structural factor affecting housing prices. His long-term price model, using a model of demographic structure by age group, simulates the trend of housing prices, assuming that Korea’s housing market may experience aging similar to Japan’s over the next 20 years. Results show a downturn from 2019 (annualized growth rates of –1 to –2 percent) in real housing prices, but a rise in nominal ones (by an annual average 0.4 percent), even with effects of population aging. Results are consistent with the lifecycle hypothesis and overlapping generation models, in that aging has a direct impact on asset prices. Korea’s housing market has not yet experienced the aging effects that Japan’s has. Inflation in housing prices will be the factor deciding whether population aging effects on the housing market in Korea will be similar to those in Japan.

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Abbreviations and acronyms

Exploring the Causes and Remedies of Japanization

Edited by Dongchul Cho, Takatoshi Ito and Andrew Mason

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Subhash C. Jain and Ben L. Kedia

The critical aspects of growth in India are described. First among them is the creation of jobs, which is examined in this chapter. India must create 10 million jobs annually. For this to happen, manufacturing is the key to prosperity. It leads to economies of scale, impacts innovation and has a multiplier effect on the rest of the economy. For India to boost manufacturing, it must pursue a variety of strategic steps such as the overhaul of labor laws, simplifying land acquisition, providing tax incentives, encouraging foreign investment and other innovations.

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Subhash C. Jain and Ben L. Kedia

The chapter focuses on four aspects of economic growth: enhancing agriculture and farm productivity; building and improving basic infrastructure related to transportation, communication, energy availability, networks and bureaucratic efficiency; strengthening education at all levels, from primary schooling to higher education; and emphasizing innovations to make the most of limited resources. If these aspects are addressed adequately, India will be able to achieve its growth objective in a short time frame and join the ranks of developed countries.

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Subhash C. Jain and Ben L. Kedia

India must pay attention to four supporting factors in addition to the areas elaborated in the previous two chapters to achieve its economic aspirations. These include provision of basic services to the citizenry such as food, drinking water, sanitation, housing, energy, health care, education and social security; strengthening the rule of law; encouraging competition among states, and public-private enterprises; and promoting India’s cultural heritage. India can learn from the experiences of other nations, particularly the United States, to realize its economic endeavors. But at the end of the day, it must develop its own unique solutions to make headway on all fronts.

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Subhash C. Jain and Ben L. Kedia

This book traces the history of India’s progress since its independence in 1947 and advances strategies for continuing economic growth. Insiders and outsiders that have criticized India for slow economic growth fail to recognize all it has achieved in the last seven decades, including handling the migration of over 8 million people from Pakistan, integrating over 600 princely states into the union, managing a multi-language population into one nation and resolving the food problem. The end result is a democratic country with a strong institutional foundation. Following the growth strategies outlined in the book and with a strong leadership, India has the potential to stand out as the third largest economy in the world in the next 25 to 30 years.