Economics answer question Essay Example | Topics and Well Written Essays - 1000 words

Economics answer question - Essay Example A decade after the World War II, Japan has experienced astonishing economic figures, flashing a near double-digit "average annual growth rate of 9.2% and increased its real GDP sevenfold" (Itoh, 1). Itoh has identified at least four factors relating to the miraculous climb of the Japanese economy since early 1950's. Generally, what helped Japan gain such a high growth rate are timely help from abroad with a favorable economic environment and sound macroeconomic policies. One of the accidental help to the Japanese economy is the favorable international environment. The "US global strategy of creating a bulwark against communism by the substantial reduction of war reparation in addition to a recovery aid programme" has helped Japan's economy (Itoh, 2). The growth if world trade has also facilitated Japanese exports and imports. The second factor that brought Japan's booming economy was the availability of new technologies. The Japanese were able to easily adapt the technologies brought from the US into their production primarily due to the high adaptability of Japanese workers and rising level of education and training. It has then become an important jumpstart for the Japanese automobile industry. The favorable terms of trade... The fourth reason for the Japanese economic boom was the cheap and docile labor. The "large shift in working population away from agricultural areas provided the necessary amount of relatively cheap labor for the rapid growth of urban secondary and tertiary capitalist industries" (Itoh, 3). Some macroeconomic policies applied by the Japanese government also did well to their economy. It includes the "necessary infrastructure such as seaports, roads, railways and communication system" (Itoh, 4). Generally, "the Japanese economic growth was mainly dependent on expanding domestic market and maintained a relatively low rate of export dependency" (Itoh, 4) The Economic Struggle The collapse of the Bretton Woods International Monetary System has brought a domino effect of economic crisis to Japan. The trade deficit of USA coupled with multinationalization of US firms increase private foreign investments leading to a substantial outflow of dollar funds. This event has resulted in the appreciation of the yen, as all economists know; this event hurt the export of Japan. Countries resorted the fully floating exchange rate in 1973, believing that this would gradually resolve international trade imbalance. However, "the automatic adjustment mechanism did not work particularly in the case of Japan" (Itoh, 6). There also a resulting inflationary pressures making the products more expensive. An over-accumulation of capital also occurred to the point wherein the total of capital became so numerous compared to the Japanese working population. This condition became favorable to worker, therefore nominal wages were observed to have increased by 63% in 1970-1973. After th ese events, "the Japanese economy became