The Japanese Economy, second edition (The MIT Press)

Title Page
Copyright Page
Dedication
Table of Contents
Preface
Preliminary Notes
Acknowledgments
1. An Introduction to the Japanese Economy
2. History of the Japanese Economy
	2.1. Introduction
	2.2. The Tokugawa (Edo) Era: 1603–1868
	2.3. Money in Tokugawa Japan
	2.4. Foreign Pressure and the Fall of Tokugawa
	2.5. The Meiji Restoration
	2.6. Economic Development and Growth in Meiji Japan
		2.6.1. Economic Development
		2.6.2. Heritages from the Tokugawa Era
		2.6.3. Policies of the Meiji Government during the Transition
		2.6.4. Industrial Development in Meiji Japan
	2.7. Money, Prices, and the Exchange Rate in Meiji Japan
	2.8. Imperialism and Japan
	2.9. The War Economy
	2.10. Transformations of Industrial Structure
	2.11. International Trade
	2.12. Japan as a Model for Economic Development
	2.13. Summary
	Appendix 2.A: The Rice Futures Market
	Appendix 2.B: Guide to Data
	References
3. Economic Growth
	3.1. Introduction
	3.2. Postwar Recovery: 1945–1950
		3.2.1. Economic Reforms Imposed by the Occupation Force
		3.2.2. Antitrust Measures
		3.2.3. Land Reform
		3.2.4. Labor Reform
		3.2.5. The Education System
		3.2.6. The Political System
		3.2.7. The Early Days of the Cold War
	3.3. Major Macroeconomic Problems after the War
		3.3.1. The Planned Economy Immediately after the War
		3.3.2. The Dodge Plan
		3.3.3. Financial Reconstruction
		3.3.4. Summary of the Foundation of Rapid Economic Growth
	3.4. Rapid Economic Growth: 1950–1973
		3.4.1. An Income-Doubling Plan
		3.4.2. Demand-Side Analysis of Economic Growth: Sources
		3.4.3. Supply-Side Analysis of Economic Growth: Growth Accounting
		3.4.4. Endogenous Growth Models
	3.5. Growth Slowdown: 1973–1987
	3.6. Information Technology and Economic Growth
	3.7. Abenomics
	3.8. Summary
	Appendix 3.A: Guide to Data
		Postwar Data Source
		Use of Data
	References
4. Business Cycles, and Boom and Bust
	4.1. Introduction
	4.2. Dating of Business Cycles
		4.2.1. Definition
		4.2.2. Japanese Business Cycle Dates
	4.3. Business Cycles and Growth
		4.3.1. Growth and Cycles
		4.3.2. Tankan
		4.3.3. The Unemployment Rate and Industrial Production
	4.4. Understanding Business Cycles
		4.4.1. Two Schools of Thought
		4.4.2. The Political Business Cycle
	4.5. Japan’s Business Cycles
		4.5.1. The Rapid Economic Growth Period
		4.5.2. Downturn in 1973–1974
		4.5.3. The Moderate Growth Period
		4.5.4. The Bubble and the Lost Two Decades: 1987–2012
		4.5.5. The Lost Two Decades
	4.6. Demand Shortage or Structural Problems?
	4.7. Summary
	Appendix 4.A: A Simple Keynesian Macroeconomic Model: Review
	Appendix 4.B: Theories of Business Cycles
		Keynesians
		Monetarists
		Real Business-Cycle Theories
	References
5. Financial Markets and Supervision
	5.1. Introduction
	5.2. The Japanese Financial System in the Rapid Economic Growth Period
	5.3. The Main Bank System
	5.4. Financial Deregulation (Mid-1970s to Late 1980s)
	5.5. Nonperforming Loans and the Banking Crisis (1990s)
		5.5.1. Jusen
		5.5.2. Bank Insolvency
		5.5.3. Evergreening and Forbearance
		5.5.4. Deposit Insurance
		5.5.5. Big Bang Reform
		5.5.6. Banking Crisis of 1997
	5.6. Takenaka Reform 2002–2003
	5.7. A New Financial System in Japan
		5.7.1. The Global Financial Crisis
		5.7.2. Resolution Mechanism
		5.7.3. Basel I, II, and III and Japan
	5.8. The Future
	References
6. Monetary Policy
	6.1. Introduction
		6.1.1. Japan as a Laboratory of Monetary Policy
		6.1.2. Theory
		6.1.3. Base Money Control of the Money Supply
		6.1.4. Monetary Policy and Transmission Channels
		6.1.5. Inflation Bias
	6.2. Monetary Policy: 1950–1971
		6.2.1. Bretton Woods System
		6.2.2. Disequilibrium in Financial Markets
	6.3. The Great Inflation of the Early 1970s
		6.3.1. End of the Bretton Woods System
		6.3.2. The Policy Mistake That Caused the Great Inflation
		6.3.3. The Political Economy of the Monetary Policy Mistake
		6.3.4. Quick Tightening in 1979
	6.4. Great Moderation in Japan: 1975–1985
	6.5. The Bubble and Its Burst: 1985–1998
		6.5.1. The Bubble
		6.5.2. The Bursting Bubble
	6.6. The New Bank of Japan Act of 1998
	6.7. The Challenge of Deflation, 1998–2012
		6.7.1. Deflation
		6.7.2. Zero Interest Rate Policy, 1998–2000
		6.7.3. Quantitative Easing in 2001–2006
		6.7.4. Exit from QE in 2006
		6.7.5. Unconventional Monetary Policy Globally, 2008–2013
	6.8. Inflation-Targeting Debate
	6.9. Abenomics: The First Arrow
	6.10. Summary
	Appendix 6.A: Guide to Data
	Appendix 6.B: Downward Bias of the CPI
	References
7. Public Finance
	7.1. Introduction
	7.2. Basic Facts
		7.2.1. Revenue, Expenditure, Deficits, and Debt
		7.2.2. Institutions
	7.3. The Tax Structure
		7.3.1. Tax Revenue
		7.3.2. Personal Income Tax
		7.3.3. Consumption Tax
		7.3.4. Corporate Income Tax
		7.3.5. Inheritance Tax
	7.4. Government Spending
	7.5. The Rise and Fall of the Government Deficit, 1975–1990
	7.6. Return of the Budget Deficit
	7.7. Sustainability of Government Debt
	7.8. Fiscal Policy as a Tool for Macroeconomic Stabilization
	7.9. Ricardian Neutrality and Non-Keynesian Effects
		7.9.1. Effects of Government Deficits
		7.9.2. Methodology and Evidence
	7.10. The FILP and Postal Savings
	7.11. Local Public Finance and Decentralization
	7.12. Debate over Consumption Tax
	7.13. Summary
	Appendix 7.A: Guide to Data
	Appendix 7.B: Sustainability Calculation
	References
8. Saving, Demography, and Social Security
	8.1. Introduction
	8.2. Japan’s Saving Rate
	8.3. Life-Cycle Model of Saving and Consumption
	8.4. Japanese Demographic Transition
		8.4.1. The Population Pyramid
		8.4.2. The Population and Labor Force in Japan
	8.5. Why Was the Japanese Saving Rate So High?
		8.5.1. High Growth and Small Proportion of the Elderly
		8.5.2. Underdeveloped Social Security System
		8.5.3. High Cost of Housing
		8.5.4. Intentional Bequests
	8.6. International Comparison of Demographic Changes
	8.7. The Pension System of Japan
	Appendix 8.A: Guide to Data
		Family Income and Expenditure Survey (FIES)
		National Survey of Family Income and Expenditure (NSFIE)
		Comprehensive Survey of Living Conditions of the People on Health and Welfare
	Appendix 8.B: The Saving-Investment Identity
	Appendix 8.C: The Overlapping Generations Model
		Constant Population and Constant Income
		Increasing Population
		Increasing Per-Capita Income
		A PAYGO Social Security System with Population Growth
		A PAYGO Pension System with Population Decline
	References
9. Industrial Structure
	9.1. Introduction
	9.2. From Zaibatsu to Keiretsu: The Postwar Transformation
	9.3. Enterprise Groups: From the 1950s to the 1980s
		9.3.1. The Big Six
		9.3.2. Other Enterprise Groups and the Main Bank System
		9.3.3. The Role of the General Trading Companies
		9.3.4. A Comparison of the Zaibatsu and the Postwar Enterprise Group
		9.3.5. A History of Cross-Shareholding in Japan
	9.4. Economic Consequences of Horizontal Keiretsu
	9.5. Vertical Keiretsu
		9.5.1. Production Keiretsu
		9.5.2. Distribution Keiretsu
	9.6. Bank Consolidation and Transformation of Horizontal Keiretsu in the 1990s
	9.7. Industrial Policy
	9.8. How Effective Has Japan’s Industrial Policy Been?
		9.8.1. Tools of Industrial Policy
		9.8.2. The Case of the Automobile Industry
		9.8.3. Evaluation of Industrial Policy
		9.8.4. Why Industrial Policy Failed to Create the “Silicon Valley” in Japan
		9.8.5. The Debate in the United States over Industrial Policy
	9.9. Evolution of the Anti-Monopoly Act and Competition Policy
	Appendix 9.A: Guide to Data
	References
10. The Labor Market
	10.1. Introduction
	10.2. Basic Statistics
	10.3. Traditional, Stylized Facts of the Japanese Labor Market
		10.3.1. Seven Characteristics
		10.3.2. Lifetime Employment
		10.3.3. Seniority Wages
		10.3.4. Enterprise Unions
		10.3.5. Skill Formation and White-Collarization of Blue-Collar Workers
		10.3.6. Bonuses and the Share Economy
		10.3.7. Shunto (Spring Offensive)
	10.4. Changing Labor Practices
	10.5. Youth Unemployment
	10.6. Working Hours of Japanese Workers
	10.7. Womenomics
	10.8. Summary
	Appendix 10.A: Concepts and Theories of Unemployment
		Theories of the Labor Market
	Appendix 10.B: Guide to Data
	References
11. International Trade
	11.1. Introduction
	11.2. Balance of Payments—Definition
	11.3. Balance of Payments—The Basic Facts
	11.4. Comparative Advantage and Pattern of Trade
	11.5. Trade Politics
	11.6. Monopolistic Competition and Intra-Industry Trade
	11.7. Gravity Equation
	11.8. Fragmentation
	11.9. WTO and FTA
	11.10. Summary
	Appendix 11.A: Gains from Trade
	References
12. International Finance
	12.1. Introduction
		12.1.1. The Balance of Payments
		12.1.2. The Bretton Woods System
		12.1.3. The Floating Exchange Rate Regime
	12.2. Exchange Rates
		12.2.1. Nominal Exchange Rate
		12.2.2. Real Exchange Rate and PPP
		12.2.3. Effective Exchange Rates
		12.2.4. Exchange Rate Dynamics and Microstructure
	12.3. Capital Flows and Capital Controls
		12.3.1. The Financial Account
		12.3.2. Capital Controls and Liberalization
		12.3.3. Covered Interest Parity
		12.3.4. Uncovered Interest Rate Parity and Carry Trade
	12.4. Intervention
		12.4.1. What Is Intervention?
		12.4.2. Japanese Intervention
	12.5. Exchange Rate and Macro Fundamentals
		12.5.1. Misalignment in the First Half of the 1980s
		12.5.2. The Yen/Dollar Working Group and Financial Deregulation
		12.5.3. The Plaza Agreement
		12.5.4. The Louvre Accord and the Target Zone Experiment
		12.5.5. Unsterilized Intervention
		12.5.6. Global Imbalances
	12.6. Internationalization of the Yen
		12.6.1. Exorbitant Privilege
		12.6.2. Invoicing Currency
		12.6.3. The BIS Triennial Survey
		12.6.4. Foreign Reserve Currency Composition
	12.7. Concluding Remarks
	References
13. US-Japan Economic Conflicts
	13.1. Introduction
	13.2. US-Japan Trade Conflicts before the 1980s
	13.3. Emergence of Comprehensive Trade Talks: 1980s
		13.3.1. Growing US Frustrations about Trade with Japan
		13.3.2. The Automobile VER
		13.3.3. Escalation of Conflict
		13.3.4. The Semiconductor Agreement
		13.3.5. Market-Oriented Sector-Specific (MOSS) Talks, 1985–1996
		13.3.6. The Omnibus Trade Bill and Super-301
		13.3.7. Structural Impediments Initiatives (SII), 1989–1990
		13.3.8. Keiretsu and Trade
	13.4. Managed Trade Demand and Refusal in the 1990s
		13.4.1. Diverging Attitudes of the US and Japan
		13.4.2. Start of the US-Japan Framework Talks
		13.4.3. Hosokawa-Clinton Showdown
		13.4.4. LDP-Socialist Coalition Government
		13.4.5. The Final Showdown—Automobiles and Auto Parts
		13.4.6. Kodak versus Fuji
	13.5. The End of Japan Bashing
	13.6. The TPP, the Trump Administration, and Back to Bilateral Negotiations
	13.7. Concluding Remarks
	References
14. The Lost Two Decades
	14.1. Four Phases
	14.2. The Bubble
	14.3. Phase One
		14.3.1. Bubble Burst
		14.3.2. PKO and Other Stimuli to Combat the 1993 Recession
		14.3.3. Financial Instability
	14.4. Phase Two
		14.4.1. The Banking Crisis of 1997–1998
		14.4.2. Consumption Tax Increase in 1997
		14.4.3. The Zombie Problem
		14.4.4. Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE)
	14.5. Phase Three
		14.5.1. Koizumi Reform
		14.5.2. Exiting QE
	14.6. Phase Four
		14.6.1. The Lehman Brothers Failure
		14.6.2. Spillover to Japan
		14.6.3. Monetary Policy Response and Exchange Rates
		14.6.4. Political Chaos
		14.6.5. Supply Side
		14.6.6. The Japanese Model and Productivity
		14.6.7. Environmental Protection
	14.7. Abenomics and the End of the Lost Two Decades
	References
Index