http://www.eastasiaforum.org/2009/02/01/east-asias-moment-of-truth/ Economics, Politics and Public Policy in East Asia and the Pacific Sun, 12 Feb 2012 22:50:38 +0000 hourly 1 http://wordpress.org/?v=3.2 http://www.eastasiaforum.org/2009/02/01/east-asias-moment-of-truth/comment-page-1/#comment-8729 Rameswar Tandon Thu, 05 Feb 2009 07:37:35 +0000 http://www.eastasiaforum.org/?p=1578#comment-8729 Whether in the new century the 'Japanese model' is facing extinction depends on how it is defined, making a distinction between a macro-model and a micro or corporate model. While Japan has frittered away one decade -- why should be next decade be any different? Only now have recent events persuaded the Japanese people that without reforms, the situation can only get worse. The more important problem is that the institutions and practices forged to create the Japanese miracle still rule Japan; Here institutional changes are most essential; as Aoki recently stressed, the inter-connections between key features-the rank hierarchy characteristics of several parts of the model reinforce each other and create system in which 'instead of facing perfectly competitive markets for factors of production, the firm is related to other agents- workers, investors and suppliers- through long-term relational contracting; Here in spite of alarming size of bad loans at the depth of banking crisis, it is hard to find unambiguous evidence that the system itself was predisposed to encouraging excessive capital-stock build up; Japan's crisis is thus a crisis of governance in both government and business, a revival will require a basic overhaul of several institutions; The overall outlook for Japan in the new century still not very encouraging; some observers foresee neither reforms nor muddling through, but meltdown. in my judgment the slow pace of reforms in Japan for several years has shown a reluctance to abandon past successful formulae and also a desire to preserve the 'social' dimension of the Japanese model or a third middle way to reforms in new century; While more fiscal and monetary stimulus than ever is being supplied by government, yet getting fewer benefits than ever. Japan will never solve its chronic deficiency of demand until it shifts a greater share of national income to the consumer. Also see, Rameshwartandon-The Japanese Economy and the way forward' released by Palgrave Macmillan,2005 Whether in the new century the ‘Japanese model’ is facing extinction depends on how it is defined, making a distinction between a macro-model and a micro or corporate model. While Japan has frittered away one decade — why should be next decade be any different? Only now have recent events persuaded the Japanese people that without reforms, the situation can only get worse. The more important problem is that the institutions and practices forged to create the Japanese miracle still rule Japan; Here institutional changes are most essential; as Aoki recently stressed, the inter-connections between key features-the rank hierarchy characteristics of several parts of the model reinforce each other and create system in which ‘instead of facing perfectly competitive markets for factors of production, the firm is related to other agents- workers, investors and suppliers- through long-term relational contracting; Here in spite of alarming size of bad loans at the depth of banking crisis, it is hard to find unambiguous evidence that the system itself was predisposed to encouraging excessive capital-stock build up; Japan’s crisis is thus a crisis of governance in both government and business, a revival will require a basic overhaul of several institutions; The overall outlook for Japan in the new century still not very encouraging; some observers foresee neither reforms nor muddling through, but meltdown. in my judgment the slow pace of reforms in Japan for several years has shown a reluctance to abandon past successful formulae and also a desire to preserve the ‘social’ dimension of the Japanese model or a third middle way to reforms in new century; While more fiscal and monetary stimulus than ever is being supplied by government, yet getting fewer benefits than ever. Japan will never solve its chronic deficiency of demand until it shifts a greater share of national income to the consumer. Also see, Rameshwartandon-The Japanese Economy and the way forward’ released by Palgrave Macmillan,2005

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