Business in Asia: Impact of Japanese Industrial Policy, Asian Financial Crisis, International Production Networks, Exchange Rates, and Indian Economy

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ECONOMICS

Business in Asia
1) A main contributor to Japan’s fast economic growth during the period 1960s-80s
was the Japanese government’s creative use of industry policy. What was the
impact for business, both abroad and domestic?
The main aim of the industrial policy was to co-operate closely mainly with the private
firms. With the aid of the resources, the business of Japan was able to shift the funds to
different industries that enabled Japan to gain a competitive advantage. The policies, as
well as methods that were different in this scenario and it, impacted the business as a
whole whereby an increment was observed in the input productivity, and a direct
influence was seen in the process of industrial investment. In short, investment guidance
was noted that led to cooperation and enabled the companies to have a strong presence in
the market. The overall benefits of the policy were pointed out in the form of trade,
labour markets, incentives of tax and competition. With the aid of systems there were
widespread benefits in the form of trade protection, subsidies, adjustments in the labour
market, etc. hence, the overall business of Japan transformed and escalated to a great
extent. In short, the policies were highly beneficial and enabled the progress. Further, the
plans led to the emergence of new technologies that uplifted the overall market and led to
a significant change. It was a significant process of industrial development that
transformed the market of Japan in the international arena.
2) What, in your view, caused the Asian Financial Crisis? What should be done
when an economy is in recession as occurred in the AFC? Discuss with the use of
examples.
The Asian Financial Crisis happened with the asset bubbles. There was strong growth in
the region export economies that led to the strong level of FDI that led to high level of
real estate value, higher spending of corporate and huge projects of public infrastructure
that were funded by huge borrowings from a bank. The investors who were ready and
use to lend came under the reduce investment quality, and the capacity in excess began
to be projected in the economies. In tune to this, the Federal Reserve began to enhance
the rate of interest to face the process of inflation that led to less attractive exports and
foreign investment on a lower level.
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Business in Asia
Further, the Asian Financial crisis was fastened by the commercial banks of Japan who
lessened the exposure to Asia because of troubles in Thailand and South Korea.
Countries such as Indonesia, Thailand and South Korea had huge deficits of current
account meaning that the import of goods and services were more as compared to the
export. This was a projection of the economic growth of high rate and consumption. The
deficit of the current account was financed by the flow of money concerning a capital
account, and the accumulation was due to a higher percentage of interest in the East.
3) Why are International Production Networks so important within the context of
Asian economic development? Can Asian countries currently struggling or
emerging benefit from the examples of others? Discuss with the use of real world
examples.
International network is vital in the context of Asian economic development as it leads to
setting up of subsidiaries in the foreign nation. Further, it leads to setting up of
infrastructure. On the establishment of the network, it becomes easy to invest in foreign
stock and bond market, easier to withdraw money, etc. Further, the two-way trade comes
into operation, and this helps the economy in generating international trade. The global
network can result in advantages, as well as disadvantages. Diversification, as well as
independence, can be observed due to the International Production Network, however;
impacts of exchange rate influence the trade and therefore can have an advantage on the
cost advantage. Such a scenario can be defined with the help of an example:
If the Chinese organization imports more than 70% of the raw material from Japan, the
increment in cost is about 10% (that existed in RMB as depreciation happens by 10%).
Hence, the overall cost in RMB = 0.3(added value) plus 0.7 (import of raw material
divided by 0.9 (100%-10%) = 1.08. Then the overall cost will become 0.97 (1.08*0.9) in
the case of Yen hence the currency of Yen will benefit and increase.
4) “Asia’s welfare continues to depend on exports to the developed markets of
Europe
And the US, as well as to each other. When developed markets falter, Asian
markets
plummet.” (Henny Sender in Financial Times, January 23, 2012). Intra-Asian trade
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