Japanese Economy

Japanese Economy
Economics 142
Fall 2020

Course Description

Course Description

This course is a broad introduction to the fascinating Japanese economy. Japan was the first non-Western nation to become a major industrial power, providing many lessons for economic development. Japan is now the fourth largest economy (PPP) in the world behind the China, the U.S., and India. Japan is the world’s largest creditor nation, but faces enormous challenges with an aging population, mounting government debts, and corporate sector and labor market reforms.

We will begin by considering economic conditions during the Tokugawa period, and the process of economic growth since the Meiji Restoration. We will examine the high rates of growth in the post WWII period, along with the economic slowdown in the Heisei period. We will discuss the character of Japanese economic policy making as well as on the behavior of Japanese enterprises, financial institutions, labor force and households. Topics will include macroeconomic growth, monetary and fiscal policies, international trade, industrial policy, labor markets, savings and investment. With the collapse of the Bubble economy, and the Lost Decade, we will end with a discussion of Japan’s recent economic conditions.

Prerequisite for the course is Economics 51 and 52. Students should be prepared to apply basic economic concepts and analytical techniques to the study of the Japanese economy. Requirements for the course include class attendance and participation (20%), several problem sets (20%), a midterm exam (20%) a paper of about 3000 words and presentation in class (20%), and a final exam (20%).

The midterm exam will be administered on Wednesday 14 October in class, the paper is due on Monday 23 November, and the final exam will be on Tuesday 1 December at 9am PST.

The textbook for the class will be: Ohno, Kenichi, The History of Japanese Economic Development, Routledge, 2018. Additional readings will be assigned during the semester.

The following books are recommended as useful references for background information. They are the most comprehensive books on the Japanese economy, and have been placed on reserve at Honnold.

Aoki and Patrick, eds., The Japanese Main Bank System: It’s Relevance for Developing and Transforming Economics, Oxford University Press, 1994. HG 3324 J363
Blomstrom, Corbett, Hayashi and Kashyap, eds., Structural Impediments to Growth in Japan, University of Chicago Press, 2003. HC 462.95 S78
Blomstrom, Ganges, and La Croix, eds., Japan’s New Economy: Continuity and Changes in the Twenty-First Century, Oxford University Press, 2001. HC 462.95 J37
Farris, Japan to 1600: A Social and Economic History, University of Hawai'i Press, 2009.
Flath, The Japanese Economy, 3rd edition, Oxford University Press, 2014.
Francks, Japanese Economic Development: Theory and Practice, 3rd edition, Routledge, 2015.
Hoshi and Kashyap, Corporate Financing and Governance in Japan, MIT Press, 2001.
Hoshi and Patrick, eds., Crisis and Change in the Japanese Financial System, Kluwer Academic Publishers, 2000.
Ito and Hoshi, The Japanese Economy, The MIT Press, 2nd edition, 2020. HC 462.9 I79
Lechevalier, The Great Transformation of Japanese Capitalism, Routledge, 2014.
McClain, A Modern History of Japan, Norton, 2002.
Nakamura, The Postwar Japanese Economy, University of Tokyo Press, 1981. HC 462.9 N34X
Patrick and Rosovsky, editors, Asia’s New Giant, Brookings Institution, 1976. HC 462.9 A84
Posen, Restoring Japan’s Economic Growth, Institute for International Economics, 1998. HJ 1394 P67
Taniuchi, The Japanese Economy, Cengage Learning, 2014.
Totman, Early Modern Japan, University of California Press, 1993.
Yamamura and Yasuba, editors, The Political Economy of Japan, Volume 1: The Domestic Transformation, Stanford University Press, 1987. HC 462.9 P57

The Japan Times is Japan's largest and oldest English language daily newspaper. The Nikkei Asian Review is an Asia-focused English language publication with business, finance, economic and political news, comments, and analysis for Asia. The OECD (Organization for Economic Co-operation and Development) provides regular reports and useful up-to-date references on the state of the Japanese economy. The Journal of the Japanese and International Economies (JJIE), Japan and the World Economy (JWE), and Asian Economic Policy Review are excellent, more analytically advanced source of original articles on the Japanese economy. Students are encouraged to come talk with me about the course, economics in general or anything for that matter. You are welcome to come by the office to chat with me at any time. But I am most likely to be available if you come during office hours or make an appointment.

Office: Fletcher 216

Office Hours: Mon -Thurs 2:00-3:00pm and by appointment on Zoom

Phone: 607-3769

Email: lyamane@pitzer.edu

You can leave voicemail or send email to me 24 hours a day. After the pandemic, please join me for lunch on Fridays from 12noon - 1:00pm in McConnell Dining Hall. These are office hours over a meal.

Course Syllabus

Week 1
Overview
Ohno, Chapter 1
Wilkinson, Endymion, Japan vs the West: Image and Reality, Penguin Books, 1990, Chs 10-12, pp. 97-119.

Week 2
The Edo Society
Ohno, Chapter 2
Oishi, Shinzaburo, "The Bakuhan System," in Nakane, Chie, and Shinzaburo Oishi, eds., Tokugawa Japan: The Social and Economic Antecedents of Modern Japan, 11-36.

Week 3
Transition from Edo to Meiji
Ohno, Chapter 3
Rosovsky, Henry, "Japan's Transition to Modern Economic Growth," in Industrialization in Two Systems: Essays in Honor of Alexander Gerschenkron, Rosovsky, ed., 1966, 91-139.

Week 4
Importing and absorbing Technology
            Ohno, Chapter 4
Yamamura, Kozo, “Success Ill-gotten? The Role of Meiji Militarism in Japan’s Technological Progress,” Journal of Economic History, March 1977.

Week 5
Development of Key Industries
            Ohno, Chapter 5
Saxonhouse, Gary, “A Tale of Japanese Technological Diffusion in the Meiji Period,” Journal of Economic History, March 1974, pp. 149-65.

Week 6
Budget, Finance, and the Macroeconomy of Meiji
Ohno, Chapter 6
Nakamura, James, “Meiji Land Reform, Redistribution of Income and Savings from Agriculture,” Economic Development and Cultural Change, July 1966, pp. 428-439.

Week 7
World War I and the 1920s
            Ohno, Chapter 7
Yamazawa, Ippei, “Industrial Growth and Trade in Prewar Japan,” Developing Economies, March 1975, pp. 38-65.

Week 8
Banking Crisis of 1927
            Ohno, Chapter 8
Temin, Peter, “Transmission of the Great Depression,” Journal of Economic Perspectives, Spring 1993.

Week 9
The 1930s and the War Economy
Ohno, Chapter 9
Davis, Donald and David Weinstein, “Bones, Bombs, and Break Points: The Geography of Economic Activity, American Economic Review, December 2002, pp 1269-1289.

Week 10
Postwar Recovery 1945-49
Ohno, Chapter 10
Baumol, William, Sue Ann Batey Blackman, and Edward Wolff, “International Convergence: The Comparative U.S. Productivity Lag,” in Productivity and American Leadership: The Long View, Cambridge: MIT Press, pp. 85-114.

Week 11
The High Growth Era
Ohno, Chapter 11
Hashimoto, Masanori, and John Raisian, “Employment Tenure and Earnings Profiles in Japan and the United States,” American Economic Review, 1985.
Kambayashi, Ryo and Takao Kato, “Long-Term Employment and Job Security over the Past 25 Years,” ILR Review, March 2017, pp. 359-394.

Week 12
Economic Maturity and Slowdown
Ohno, Chapter 12
Porter, Michael and Mariko Sakakibara, “Competition in Japan,” Journal of Economic Perspectives, Winter 2004.

Week 13
The Asset Bubble and Prolonged Recession
Ohno, Chapter 13
Patrick, Hugh, “Japan’s Economy: Moving Along its Modest Sustainable Growth Path”, 2019.

Additional readings will be assigned during the semester. All readings, except for the Ohno textbook, will be posted on the course web page or Sakai course folder.

Research Paper

One of the requirements for successful completion of this course is a research paper of 3000 words on some aspect of the Japanese economy. You are free to choose any relevant topic of interest, but please discuss it with me first. The broad topic areas include historical or contemporary analysis of fiscal, monetary and industrial policies, industrial organization, financial markets, labor markets, and international trade. Particular issues include the ageing population and demographic issues, consequences of the "lost decades" and economic growth, the national debt and the consumption tax, and zero interest rates and monetary policy. The goal is for you to become conversant in the area of your choice. This can be more of a glorified literature review than an original research paper. This is a link to some references for various topics.

To help you along your way, let me suggest the following schedule. Please submit a research proposal to me by Wednesday 9 September explaining the issues and questions you would like to address. A preliminary bibliography and outline should be submitted by Wednesday 30 September. Try to submit a first draft to me for comments and suggestions by Wednesday 4 November. The final paper is due on Monday 23 November. You will present your paper in class during the last 2-3 weeks of the semester.

For research on Japan you should become aware of some data sources on the Japanese economy. The following are some basic sources. Also check out the Japan web links.

a. Japan Statistical Yearbook
This is an excellent resource for those interested in any sort of quantitative research on Japan. The focus is not limited to economics. Usually the tables will refer to the original sources of the data. Unfortunately the original sources are frequently not available in English (but at least you have a start).

b. IMF Data
Basic macroeconomic statistics are given for each member country of the International Monetary Fund with the countries listed alphabetically.

c. The Japan Company Handbook
Basics statistics are given for each firm listed on the Tokyo Stock Exchange, the largest publicly held firms in Japan.

d. The Year Book of Labour Statistics (until 2017)
Basics statistics on the Japanese labor market.

e. The Bank of Japan Financial and Economic Statistics Monthly
Basic economic and financial statistics on Japan.

Japan Web Sites

Bank of Japan

Statistics Bureau of Japan

History of Japan (in 8 minutes)

Culture of Commerce

Problem Sets

Problem Set #1 Due Wednesday 16 September
Problem Set #2 Due Wednesday 7 October
Problem Set #3 Due Wednesday 28 October
Problem Set #4 Due Wednesday 18 November liquidity trap