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ECO100Y1 (438)
Jack Carr (32)

US Trade Deficit and Japan's Keiretsu

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Jack Carr

Feb 10 , 2009 From Japan 1989 and on, slow down, bank rate was almost 0%. Positive impact on Japanese economic growth of keeping wage cost low MITI sponsored export-led growth programs for infant-industry strategy On TEST! Chapter 8-Japan -lifetime employment, in past times, assured of a job for life, no layoffs, workers given other jobs in slow down, flexibility, workers worked as a team, managements was on the ground with the workers -compensation-workers starting with firm would get a low pay for a number of years, once became a mature worker, acceleration in their pay, good profits meant high bonuses, bad year, no bonuses -Attitude at work, work for some days in the holidays, do a good job, finish the job -Effort of labor was high, wage bill is low, profits are high, used to expand industry PLAZA ACCORD -Big 5 countries, Japan, US, England, Germany, France, met and reevaluated the 3 major currencies in the world, yen and deutche mark went up by 20%, US dollar fell by 20% -Japan wanted to increase export levels in other countries, they took a short run policy and increased their prices by only 5-10%, made short term losses in order to maintain the market penetration General Trading Companies in Japan -10 huge general trading companies that handled 60% of traded goods in Japan -Keiretsu-3 giant corporations, General trading company, Principle Bank (gave money to manufacturing without any tests), Manufacturing company The General trading company marketed the goods in international markets and domestic. Moved in to meet the marketing needs of manufacturing company, seek new sources of supply, the bank took foreign exchange risk for manufacturer, assisted in foreign direct investment. Marketing, insurance, make contracts for raw material-general trading company Reading 8.2-Sheard US opinion-Keiretsu was collusive, anti-competitive, oppose free trade, 1 mean through which Japan could introduce protectionism. -US: Keiretsu allow Japanese firms to gain unfair advantage in domestic and international competition and close off Market to foreign entrants -Keiretsu is cause for closedness of the Japanese market, causing the US current account deficit with Japan -Keiretsu is a type of cartel and collusive, create entry barriers to markets, exclusionary practices ISSUE: If the antitrust concerns about keiretsu are valid, public response lies on Japanese side, if difficulties of market access is due to the lack of competitiveness of foreign firms, the appropriate policy response is less clear, maybe foreign firms needs to devise entry strategies more suited to the Jap. Market
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