2 Outline

Introduction

Economic history of Japan

Japan’s Debts Case

Abenomics

Conclusion

References

Appendix

Economics - 1Q MBA 2021/2022 MBA AAST

 3 Introduction: Japan

Japan the 3rd Largest Economy

The largest country in the public
debt

Japanese economy is export-
oriented

Transforming in 3 Key Areas

Potential Market ( Medicine-
Robotics-IOT)

Evolving Innovation

Quality Business Environment

Economics - 1Q MBA 2021/2022 MBA AAST

 4 Question : Why didn't Japan collapse??

Japan is different economic

phenomena

Japanese Culture of encountering
crises through work and Saving

The greatest structural issue facing
the Japanese economy is the aging
of society and shrinking of the
population.

Japan is committed to achieving
sustainable growth and becoming
a pioneer in the establishment of a
new social

Economics - 1Q MBA 2021/2022 MBA AAST

 Economic history of Japan (1945-2020)
5

Post-World War II period 1945

The reconstruction period (1945-
1953)

The high growth period (1954-1973)

The slowing-down phase (1974-
1990)oil crises 73&79 - inflation

The1985 Bubble (The Real Estate,
stocks)

The structural crisis period (1991-
2011).

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: The reconstruction
6 period (1945-1953)

The reconstruction period (1945-1953)

Japan's economy during the Korean war, strong
demand for its goods and services mainly destined
to the US military effort.

Japan is to focus all its efforts and resources solely
on civil production

Japan invested in education and training. In 1950
the average years of education for people aged 15-
64 were in Japan 9.1 # in US 11.3

Japan achieved a very high rate of growth (9.9%
real GDP)

Japan could experience a rapid technological
upgrading via the purchase, or copying, or
imitation, of more advanced technologies from
countries such as the US, Germany, France and the
United Kingdom.

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: The high growth
7 period (1954-1973)

The high growth period (1954-1973)

the average annual rates of growth of real GDP (+ 9.1).

The rates of growth of real investment, real consumption,
real unit wages, total wages and exports were very
sustained.

In 1967, balanced of current account became almost
permanently positive, so that Japan soon became a net
creditor country.

the 1960s onwards, The technological level rose also very
rapidly because of the high rate of growth in investment,
because of the great increase of internal know-how and
the massive effort in education and in R. & D.

Toyotism # Fordism (mass production and mass
consumption)

Issues appeared due to developing:

Housing was very costly.

Pollution was very high.

Energy dependence from abroad very high

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: The slowing-down phase
8 (1974-1990)oil crises 73&79 - inflation

The slowing-down phase (1974-1990)oil crises 73&79 - inflation

The two great energy crises (1973-4 and 1979-80)

contributed to sharply reduce the rate of growth together
with the crisis of the fordist model of growth # Fordism pr
toyotism

Demographic issues appeared:

Low pop. Rate

low fertility, continuous prolongation of elders’ life

R&D. expenditure in % of GDP rapidly rose becoming in
the 1990s higher than in the major Western European
countries

In some industrial sectors, such as for several
microelectronic goods, motorcycles, automobiles, colour
TV, etc. Japan was even able to overtake the US and
Western European Countries becoming the top exporter in
the world market.

Many firms passed from the phase of imitation and
purchase of foreign technology to the phase of genuine
innovation

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: Economic bubble
9 (real-state, stocks)

Economic bubble:

Structural economic bubble compounded
by a cyclical speculative bubble, both of
which burst in 1989-1990

The net outflow of portfolio capitals from
Japan, especially towards the US, became
huge [Japanese investors had the
alternative of placing their savings in US
public bonds and other financial assets,
where shares gave higher dividends and
public bonds were less risky and yielded
higher returns than in Japan.]

in 1990-1, the speculative bubble burst,
these expectations were inverted and
became expectations of capital losses for
both property and stocks, causing the
model to collapse.

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: The structural crisis
10 period (1991-2011)

The structural crisis period (1991-2011).

The crisis, originally confined to finance, propagated

to the real economy from 1991 to 1993. Due to the
close interrelationship between banks and industry

The deep financial crisis of South-East Asia in 1997-
98 and the World financial crisis of 2007-11 further
contributed to depress the recovery of Japanese
finance and industry.

many investors to place their money in foreign stocks
or bonds.

many Japanese corporations began to invest more in
emerging countries, in the US and in Europe than on
the national soil, thereby reducing the growth of
employment and internal demand.

the ageing of the population is cumulative effect on
economic growth. [older population means a less
dynamic society and a sclerotized economy. There is a
lower propensity to make real investment, a larger
propensity to consume and a reduction in the saving
rate.]

there has been a large increase in income inequalities

Economics - 1Q MBA 2021/2022 MBA AAST

 Introduction: The structural crisis
11 period (1991-2011)

The structural crisis period (1991-2011)- The public

finance crisis

expansionary public expenditure policies, for
pensions, health, the salvage of financial
institutions and selected social interventions. [aging
pop.]

taxation did not grow as much as government
expenditures.

public debt in % of GDP went up from about 85%
in 1995 to 199.7% in 2010

after the Fukushima earthquake and nuclear
disaster, for the first time in over two decades, the
current account of Japan’s balance of payments
registered a small deficit, largely due to the loss of
production and exports and to the increase of
energy imports consequent to the Fukushima events

Economics - 1Q MBA 2021/2022 MBA AAST

12 Japan’s Debt Case

Japan's debt began to swell in the 1990s

when its finance and real estate bubble
burst to disastrous effect. (> 100% GDP)

Economic measures in response to the
COVID-19 crisis have brought a big increase
to Japan’s national debt. (>200% GDP)

Who is Own JGB (Japan Government
Bonds)?

70% is held by the Bank of Japan (BoJ) –
it doesn’t need repaying in the same
way as to domestic savers

most of the rest is held by Japanese
trust and investment funds

foreign sector holdings of medium- and
long-term Japanese government
securities remained below 7% (Risk-
averse private and institutional investors
buy JGB)

Economics - 1Q MBA 2021/2022 MBA AAST

13 Japan’s Debt Case

Is it safe? Or problematic?

In fact, 90 percent of the debt is held by
Japanese investors.

The bonds are denominated in yen (¥), still
seen as a safe --making Japan less
vulnerable to external pressure.

Japan is the world's biggest creditor,
holding more than $3 trillion in net assets in
foreign currency reserves and direct
investment abroad.

Low interest rate, saving ratio

Why Japan is not Greece?

Japan is running a current account surplus
≠ Greece were running current account
deficits

Japan doesn’t rely on external financing of
its public sector debt ≠ had a greater
reliance on external financing of domestic
debt

Economics - 1Q MBA 2021/2022 MBA AAST

 14 Shinzo Abe 2012-2020

born 21 September 1954) is a Japanese politician who
served as Prime Minister of Japan and President of the
Liberal Democratic Party (LDP) from 2006 to 2007 and again
from 2012 to 2020.

He is the longest-serving prime minister in Japanese history.

“I will break down any and all walls looming ahead of the
Japanese economy and map out a new trajectory for
growth. This is precisely the mission of Abenomics.”
—Prime Minister ABE Shinzo

Abenomics: is the nickname for the economic policies set
out for Japan in 2012 when prime minister Shinzo Abe came
into power for a second time.

Economics - 1Q MBA 2021/2022 MBA AAST

15 Shinzo Abe 2012-2020

Japan before Abe :

Since1990’s it suffered from sluggish economic growth

in September 2008 and the global financial crisis

In March 2011, a catastrophic earthquake and
tsunami struck northeastern Japan

deficit-to-GDP ratio breached 200% in 2010

FLOW OF FUNDS :

cash and savings make up the majority of total
assets (55%), followed by pension funds and
insurance.

if the dividends are negative, banks or securities
companies always receive commissions and fees,
so they are looking for trust fees and commissions
rather than rates of return

Aging Population

older people have the most assets in Japan, and
prefer to hold deposits, insurance, and
government bonds.

Inverse pyramid
Economics - 1Q MBA 2021/2022 MBA AAST
16 Abenomics 1.0: involved increasing the nation's money supply, boosting
government spending, and enacting reforms to make the Japanese economy
more competitive

3 Main Arrows 2012: “First Arrow": Monetary
policy, expansion aimed at achieving a 2%
inflation target

Quantitative Easing : reducing the interest rate

OMO buying bonds: buying long-term bonds

"Second Arrow": Fiscal policy, flexible fiscal

policy to act as an economic stimulus in the short
term, then achieve a budget surplus ( VAT-Bonds)

Consumption Tax increase 5-8%

Tax cuts for the rich 35%-24%

Direct government spending

"Third Arrow": Growth strategy and structural

reform , a growth strategy focusing on structural
reform and private sector investment to achieve
long-term growth, more women & foreigner in
work force, increasing tourism & Exports
17 Abenomics Achievements
Japan JPN Total Population
Japan JPN Unemployment, total (% of
total labor force) (modeled ILO 129

Millions
128
estimate) SL.UEM.TOTL.ZS
127
5 126
4 125
3 124
2 123
1 122
0 121

Japan JPN GDP (current US$) NY.GDP.MKTP.CD Japan JPN Inflation, GDP deflator
Japan JPN GDP growth (annual %) NY.GDP.MKTP.KD.ZG
(annual %) NY.GDP.DEFL.KD.ZG
7
3
Trillions

6 2.5
2
5 1.5
4 1
0.5
3 0
2 -0.5
-1
1 -1.5
-2
0

Economics - 1Q MBA 2021/2022 MBA AAST

18 Abenomics Achievements

Economics - 1Q MBA 2021/2022 MBA AAST

19 Abenomics 2.0:

Smart Regulations & Laws As markets evolve to
reflect changing social needs, we should move
quickly, and with an open mind, to help create
new businesses and new demand.

Our goal is a society that welcomes diverse ways
of working and empowers all equally, including
seniors, women, and international professionals.

Reduce property tax as for SMEs that make
certain capital investments in ICT, robotics and
cloud tools

2016 Substantial tax burden on corporate profits
will be reduced to as low as 25% for companies
proactively engaging in wage increases and
capital investment

Foreign Direct Investment and Business
Partnership
 Abenomics controversial topic:
20 1-A way to escape the deflation trap, A good way to stimulate demand
2-Or A way of Creating wealth gap, Distorting Markets

From 2012 to 2019, the number of

women joining the workforce increased
to 3.3 million, Women in management
positions in the private sector
approaches Source:

A choice to work beyond the official
retirement age for those who want to do
so. Consider raising the retirement age
of civil servants gradually from 60 to 65
years old, From 2012 to 2019,
employment rate of people over the
age of 65 increased by 5.4%

International Talent ; Actively attract
overseas professionals who have
expertise or experience in certain areas
through easier visa procedures

Economics - 1Q MBA 2021/2022 MBA AAST

21
Conclusion Why didn't Japan collapse? And still
surviving

95% of the general debt is kept locally

The Japanese debt is denominated in the Japanese
currency

Selling bonds at lower interest rates

The structure of the Japanese economy is export-
oriented

Large reserves of foreign exchange

Japanese companies deposit interest and income
in Japanese banks

Japanese banks buying government bonds

The high level of domestic savings in the family and
business sectors
Economics - 1Q MBA 2021/2022 MBA AAST
 22 References

https://en.wikipedia.org/wiki/Economy_of_Japan#cite_note-117

https://www.imf.org/en/Countries/JPN

https://en.wikipedia.org/wiki/Shinzo_Abe#Economic_policy_(Abenomics)

https://www.researchgate.net/publication/254455835_Growth_and_crisis_in
_the_Japanese_economy

https://en.wikipedia.org/wiki/Economic_history_of_Japan

https://www.japan.go.jp/abenomics/index.html

https://www.theglobaleconomy.com/Japan/inflation/

https://www.nippon.com/en/japan-data/h01016/

Economics - 1Q MBA 2021/2022 MBA AAST

 23 Macro-economic trend
This is a chart of trend of gross domestic product of Japan at market prices estimated
by the International Monetary Fund with figures in millions of Japanese Yen
Nominal
Gross PPP capita
US dollar Price index per-capita
Year domestic GDP
exchange (2000=100) GDP
product (as % of US)
(as % of US)
1955 8,369,500 ￥360.00 10.31 –
1960 16,009,700 ￥360.00 16.22 –
1965 32,866,000 ￥360.00 24.95 –
1970 73,344,900 ￥360.00 38.56 –
1975 148,327,100 ￥297.26 59.00 –
1980 240,707,315 ￥225.82 100 105.85 71.87
2005 502,905,400 ￥110.01 97 85.04 71.03
2010 477,327,134 ￥88.54 98 89.8 71.49

Economics - 1Q MBA 2021/2022 MBA AAST

 GDP Vs. Inflation
24

1985 Bank of Japan decided to

increase the domestic demand
by loosing the monetary policy
by cutting interest rates and
quantitative easing ( printing
money and throwing it at the
market)- Part time workers.

Then Bubble popped stocks
after the raise of the interest rate

1997-2000 Recession

2008-2009 Loss in Real
GDP(Export from Japan Shrank)

2012 Abenomics

Economics - 1Q MBA 2021/2022 MBA AAST

 25

Economics - 1Q MBA 2021/2022 MBA AAST