Japan — Fighting the Storm

Japan’s new Prime Minister Junichiro Koizumi promises change. He began by appointing the first female Japanese foreign minister in the country’s history. Yet, Japan’s real problems do not lie in the foreign policy arena. It’s the economy that is in shambles that poses a real challenge to the new prime minister. Our new Globalist Factsheet takes a carefully targeted look at Japan’s ailing economy.

How bad is the outlook for the Japanese economy?

In its first downgrade since initially assigning a rating to Japan in 1975, Standard & Poor’s lowered Japan’s debt rating in February 2001 — indicating the market’s confidence in a government to repay its loans — from AAA to AA+. Among Group of Seven countries, only Italy has a lower rating.
(New York Times)

Just how did Japan get into its economic crisis?

“We’ve been operating on the assumption that people will be happy if we can produce ‘things’ they want. Now we’re overflowing with ‘things’.”
(Former Foreign Minister Komura Masahiko)

How involved are foreign influences in the Japanese economy?

Only 0.2% of Japan’s work force is foreign. Among G7 countries, Italy is the next lowest at 1.7%, while France stands at 6% — and the United States at 10%.
(International Economy)

At the end of 1999, foreign investors held 19% of Japanese shares by value, up from just 4% a decade ago.
(Wall Street Journal)

How does Japan’s national debt compare to other big debtors?

Since 1997, Italy’s national debt as a share of GDP has been steady at about 120%, after seven years of increases. Meanwhile, Japan’s debt has risen from 90% of GDP in 1997 to 125% in 2000 — surpassing Italy.
(WEFA)

What are the structural problems?

In Japan, the number of directors on a corporate board tends to increase over time in order to reward long-serving managers. As of July 1998, the average number of directors among listed companies was about 20 — while 49 companies had 40 directors or more.
(OECD)

Will overcoming this economic mess be easy?

“Of course, there will be companies going bankrupt — and people who will be unemployed.”
(Prime Minister Junichiro Koizumi, in April 2001)

What does the regional trade situation look like?

In 2000, Japan’s imports from China and the rest of Asia exceeded the value of its purchases from North America plus Western Europe for the first time — 42% to 35%.
(Wall Street Journal)

How important is China to Japan, in terms of trade?

In 2000, Japan’s trade deficit with China rose to $24.93 billion. That is the largest deficit Japan has ever registered in trade with any foreign country.
(Wall Street Journal)

What does Japan import from China?

China is the source of more than 98% of all Japan’s vegetable imports.
(Washington Post)

What is the U.S. perception of the Japanese economic malaise?

“The way you get no growth is to say, ‘We’re satisfied with what we’re doing,’ — and then you will get no growth.”
(U.S. Secretary of the Treasury Paul O’Neill, on Japan’s need to examine its own shortfalls, February 2001)

Are the Japanese still into high-tech?

There are 750,000 industrial robots around the world — used particularly heavily in the car industry, which is one reason why Japan’s share of the world stock is so high. Japan’s total robot stock in 1999 was 402,000 — or 53.6% of the world’s share of industrial robots.
(Economist)

What about other technological developments?

As of October 2000, 77% of Internet web sites were in English. By January 2001, that percentage had dropped to 52%, with Japan gaining 4 percentage points, and Germany and China each gaining 3 percentage points.
(MSNBC)

Is there nothing left of the old smokestack economy?

As of 1999, Japan with 94.2 million metric tons ranked third among the top five steel producing countries behind China with 123.7, United States (97.3m), but before Russia (51.5m) and Germany (42.1m).
(New York Times)

How has the stock market fared over the last years?

On March 1, the Nikkei stock index fell to 12,681.66 — a 15 year low. Since December 1989, at the height of Japan’s ‘bubble economy’, the index dropped two-thirds.
(Washington Post)

Who owns the stocks in Japan?

As of 1999, in Japan, approximately 40% of the stocks belong to domestic financial institutions, while 24% are held by non-financial corporations.
(OECD)