Japan Market Analysis

Japan: Market Analysis

Introduction

Japan is a very important economy in the world today having a very big population, strong economy and being very industrialized. Japan achieved strong economic policies in the 20th century and since then it had managed to maintain and almost stable economic growth and there is stability as well. It is the third largest economy in the world (after the United States and China) as it’s very effective and highly competitive in terms of the international trade though productivity in other sectors like agriculture and distribution is very low. The country is also very well established in terms of industrial development with very innovative technicians and well skilled workforce, investment rates and savings. Natural resources are not well distributed and hence Japan only depends on fishing as natural resource. These and other factors make it very important to study Japan as potential hub for business.

1. Demographics

Total population – Recent population statistics indicate that Japan has a total population of about 127.63 million having undergone unusual growth rates over the past century. The country’s population growth rate is estimated to be about – 0.139% according to the 2008 estimates. The negative growth is due to the recent falling birth rates caused by scientific, social and industrial changes (MacKellar 2004).

Age structure – the rates according to the 2008 estimates are as follows; 0 years to14 years: 13.7% (male 8.9m/female 8.4); 15 years to 64 years: 64.7% (male 41.5/female 4.08); above 65 years of age the rates is 21.6% (male 11.6/female 15.8)

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Japan Market Analysis

Japan has a problem with the aging generation. About 11.6% of the population was over 65 years and it was projected that it would be 25.6% in 2030. This trend would make the country an elderly society in a very short span of time. This older population is due to low fertility rates and increased life expectancy. Family planning methods and late marriage, increased work participation by the women, increased cost of maintaining the children and small spaces for living are some other contributory factors for the change. Infant mortality irate is low and caused of death includes heart diseases, cancers and cersbrovascualr diseases (MacKellar 2004).

Middle class Size – income inequality in Japanese increased very fast estimated at a double rate compared to other developed countries. Its estimated that the 10% of the top earners in Japan get more that 3.2 times what the lower earners get and the figure has been steady fro a while. The japans had an expression – ichioku-sohchu-ryu, which factually meant ‘100 million totally middle classes’ or figuratively a nation of middle-class. However this has since been lost and the rich keep getting richer. The standards of living in Japan are generally high and majority of the population estimates at about 19% consider themselves to be rich middle class. About one third of the workers employed by local government are non- regular and most of them (estimated at 90%) earn not more than two million Japanese yen every year. Middle class is divided upon the lines of those who earn from, $2500 to $10000 per year (Nelson 2007).

Urban/Rural Composition – very little percentage of people live in ten rural areas. The trend has been so from the agricultural age to industrial age and now its information age. Currently some people have opted to stay away from towns to work from cottages or at home considering there is internet and people are networked (Nelson 2007).

1. Government

Japan developed into a democratic system in the 1920s and has since than been very stable though the parliamentary government by then was not efficient enough to handle the political and economic pressures that came later in the 1930s. This has been attributed to the fact that the nation was deeply rooted in the old system, the monarchy. Currently the government has a monarchy constitution that is being implemented by a parliament. The executive comprises the prime minister as the top government official. There are 47 administrative subdivisions. The

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Japan Market Analysis

nations is not involved in political stability since the leaders are very influential focusing more on developmental issues hence suppression things like political unrest(MacKellar 2004).

Economic freedom in Japan has become like a tradition as the nations has embraced the free market economy since for a while now since it achieved considerable economic growth rates in mid 20th century. Japan attained it highest economic growth rates in 1960s and the trend went on through to 1980s but slowed a great deal in the 1990s as the market collapsed, stock market prices going down and real estate business flopped (Röller & Waverman 2001). The country recovered from this and established even more flexible trading terms with its partners like the US and China allowing free trade. Free trade stimulated the foreign direct investments in and out of Japan. The Japanese FDI has increased greatly over the recent past to a point that it’s the leading direct investor in the world today. FDI investment in Japan has also increased with the Chinese and American companies forming the majority of the investors across all the industries. Real estate business and financial services are the most booming business in Japan under the FDI. The Japanese policies are also targeted to protect the yen abroad (Nelson 2007).

Legal system – the legal system in Japan became modernized from the traditional system to become like the European system. The Japanese court system followed the way civil law in Germany was being practiced but after the Second World War, there were dramatic changes in terms of legal reforms of the Japanese legal system. Their criminal law process and continental code which were critical for protecting the people were revised thoroughly and modeled like the American law. The legal system in Japan is hence a hybrid of Anglo-American law and continental law. The current constitution was adopted after the World War II in 1946. (MacKellar 2004)

Currency Convertibility – the currency convertibility of the Japanese yen was not firmly established to be converted and used for international trade until 1885. Government issued currency could not be converted to other currencies. The yen was introduced in 1868, a silver metal was used for the exchange and a gold yen was introduced in 1868. The central bank was established in 1882 but did not start issuing convertible notes immediately (Nelson 2007). Silver and diamond were used until 1885 when the note replaced them. Currently, the Japanese yen has grown to be very stable despite the economic challenges and inflation rates that affected the nation in mid 20th century. Its is the third most traded currency of the world today in the

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Japan Market Analysis

foreign exchange market after the united states dollar and the euro from the European nations. It’s been also accepted all over the world as a mode of payment besides other string currencies like the pound, US dollar, and the Euro. It’s always counted in multiples of 10,000 just like the western nations count thousands (MacKellar 2004)

The value of the Japanese yen to the US dollar usually varies but currently it’s at about 1.50 yen to 1 dollar. The factors that affect the US dollar Usually also affect the Japanese yen and due to such problem, the interest rates differential between the Japanese central bank and the defers reserve will have an influence on the currencies. For instance, when the federal reserves intervene to make the dollar stronger then the value of USD/JPY increase compared to the yen decreasing (MacKellar 2004).

1. Physical Infrastructure

Japan is a well developed nation in terms of building its physical infrastructure. The roads, harbors, telecommunication, airports and railways are well structured and inter-networked though the port operations are somehow non-transparent and ineffective according to the global standings. The process of importation through this hence remains relatively slow (MacKellar 2004)

Roads and Highways in Japan are well net-worked and interconnected. The spending on the roads and highways is lowered. The Japanese traffic is left handed and interconnection of high speed road and highway transport connects the major cities. Ownership fee for cars is imposed to encourage use of energy efficient machinery.

The japans railway is characterized by competition from major companies for both regional and domestic travelers. The rail traffic in Japan is much larger than any other nations. The four main islands are very much interconnected by the expensive and reliable railways network. The trains are very much convenient for movement in Japan. About 70% of the railway network is operated

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Japan Market Analysis

by the Japan railways and the rest is managed by privately owned companies (Nelson 2007).

Airports – Japan operates over 173 airports and flying has become a very common way of moving around between cities. The Haneda airport is the largest domestic airport and the also the busiest. Movement within the state and outside is very fast and comfortable (Nelson 2007)

Navigable Waterways and Ports – the ports and harbors in Japan grew to be very popular in the Mejji era because of the policy of promoting industrial promotion, military strength and national wealth as well as other social infrastructure. Yokohama and Kobe became the main trading ports in the same period (Nelson 2007).

1. Economics

The Japanese economy operates at 4.3 trillion US dollar according the purchasing power parity. Last year alone, the country experienced a 6.6% gross world product. The nation is one of the very productive countries in the world having a gross domestic product (GDP) of about 4.272 US dollars according the statistic by the IMF purchasing power disparity. The official exchange rates GDP is 4.384 US billion Dollars

GDP growth rate – Japan has a GDP growth rate of 2.3% following a very big decline in the beginning of the year. This boost is however connected to the fact that the government pumped a lot of money to improve the economy. The government is committed to increase the GDP to 2.8% Growth rate by the end of the year. Already it has invested in public works leading to increased public investments at about 36% rate. Consumer consumption increased by % as the government offered subsidies for the purchases of energy saving commodities and environmentally friendly products

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Japan Market Analysis

Per capita GDP is obtained by dividing the national output by the country’s population in terms of the US dollars per individual. The latest statistics show that Japan has a per capita GDP of $ 13,559 (MacKellar 2004)

Consumer inflation rate – the consumer inflation rates in Japan did not for the first time in two years show significant changes. It runs at 10% and hoped to increase. The consumer inflation rates can have an influence on the consumer price index. And this has been evident considering that they have increased process across Japan to go up, they are still sustained (MacKellar 2004)

Trade as share of GDP – the first priority to be used by Japan next year is focused on changes right now, is to decrease expenditure and this is hoped to be achieved by reducing public investment and government wage bill. The GDP share is I don’t understood (MacKellar 2004)

Potential market size – the market size is determined by the population estimates and the country’s GDP. In this case , Japan enjoys a population of about 127 million people and a major population power in Asia as well though the growth rates is indicated to be falling; it has a GDP per capita of 34,000 million US dollars(Nelson 2007)

1. Communications   Infrastructure

The Japanese telecommunication industry is developing very well and it’s currently ranked among the best and most active market in the world. Growing up to 2009, the nation witnessed increased growth of the VoIP and the triple play services plus a very intense competition among the dealers in the 3G sector of the market. Of notable consideration is the uptake of the FttH services and the consequential move away from the DSL and the drastic increase in developing digital and mobile broadcasts. The regulatory organizations in the japans market have been

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Japan Market Analysis

very important to shaping of the industry and due their efforts, Japan has taken a dynamic leadership function in the manipulation of the telecommunication industry in the region (MacKellar 2004)

Japan is the leading broadband dealer and has over 30 million lines. Much of the success is due to the stunning growth that took place in 2003. The mobile industry is doing fine and lead in both size and innovation the market is marked by intensive competition though the need of the consumers in the real world (Nelson 2007). Mobile users are about105 million subscribers in mobile sector of Japan. The market is described as entering maturity stage. The industry is influencing other nations in the region, several companies and universities’ hoed established.

PC ownership – many people in Japan at least own personal computers and indicated that they are not about to stop nor slow down. Almost half of the households have computers in their homes and out of these; three out four are connected to the internet. The growth rate of owning computers and getting connected to the internet is increasing at a rate of 20% per year (MacKellar 2004).

Conclusion

The Japanese have not been left out of globalization effects since they have been very active in innovation, research, technology and other efforts of advancing their economy. In fact, following the history of Japan during the times of Tokugawa, it provides a very good case study for the way a nation initially disconnected with the rest of the world has changed drastically to comply with the demands and expectations of the rest of the industrialized nations in the economic community. The social change and globalization in the modern Japanese economy is opportune and valuable contribution to economics. Japan has been different in terms of work, culture, lifestyle and economic policies.

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Japan Market Analysis

During the 1970s, Japan went through a defining Moment in its economy where the policy makers provided the nation with disinflation policies that saw it experience very low inflation rates throughout that period. This is because after the Second World War, most nations were motivated to start developing their economies since they had lost most of the resources in the war. This improvement in Japanese and Germany economy was because the two nations complied with the policy maker’s acceptance of the monetization factors affecting inflation and subsequent changes to their monetary policies. The Japanese and the Germans were disciplined to the monetary polices for instance; they willingly accepted temporary lack of employment and committed themselves not to monetize the country’s deficits. The monetary authorities accepted the fact that inflation was just a monetary occurrence. In early 1970s higher inflation rates was attributable to the use on non- monetary theories of inflation.

The most effective policy was the adoption of free market systems which significantly improved the rate and volumes of productivity in their regions of origin and opened up numerous international markets as many barriers to free trade and commerce had been reduced. Exploiting the new freedoms, many business ventures built their branches abroad and established production, distribution and marketing. The Japanese have not been left out of globalization effects since they have been very active in innovation, research, technology and other efforts of advancing their economy. In fact, following the history of Japan during the times of Tokugawa, it provides a very good case study for the way a nation initially disconnected with the rest of the world has changed drastically to comply with the demands and expectations of the rest of the industrialized nations in the economic community The social change and globalization in the modern Japanese economy is opportune and valuable contribution to economics. Japan has been different in terms of work, culture, lifestyle and economic policies. During the 1970s, Japan went through a defining Moment in its economy where the policy makers provided the nation with disinflation policies that saw it experience very low inflation rates throughout that period. This is because after the Second World War, most nations were motivated to start developing their economies since they had lost most of the resources in the war. This improvement in Japanese and Germany economy was because the two nations complied with the policy maker’s acceptance of the monetization factors affecting inflation and subsequent changes to their monetary policies. The Japanese and the Germans were disciplined to the monetary polices for instance; they willingly accepted temporary lack of employment and committed themselves not to monetize the country’s deficits. The monetary authorities accepted the fact that inflation was just a monetary occurrence. In early 1970s higher inflation rates was attributable to the use on non- monetary theories of inflation.

The most effective policy was the adoption of free market systems which significantly improved the rate and volumes of productivity in their regions of origin and opened up numerous

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Japan Market Analysis

international markets as many barriers to free trade and commerce had been reduced. Exploiting the new freedoms, many business ventures built their branches abroad and established production, distribution and marketing.

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Japan Market Analysis

References

MacKellar L. (2004). Economic impacts of population aging in Japan. ESRI studies series on ageing. Edward Elgar Publishing

Nelson E. (2007). The Great Inflation and Early Disinflation on Japanese and Germans. The International Central Banking Journal. Vol. 3/4 pp 22 – 77

Röller L & Waverman L. (2001). Telecommunications Infrastructure and Economic Development: A Simultaneous Approach. The American Economic Review, Vol. 91, No. 4 (Sep., 2001), pp. 909-923

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