Economic Analysis of Japan and Australia

This assignment requires a comparative analysis of the economies of Japan and Australia. Students need to examine various economic indicators such as GDP growth, inflation, infrastructure development, real interest rates, tax revenue, tertiary education enrollment, unemployment, government spending, and average monthly wages for both countries. The analysis should highlight the strengths and weaknesses of each economy and draw comparisons between them.

Running head: Macroeconomics
Macroeconomics
Name of the Student
Name of the University
Author note

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Executive Summary
The report evaluates the effect of major macroeconomic variables on investment decision of
firm. Australia maintains a good trade and investment relation with many nations. Japan is one
nation with which Australia shares a good relation. Before investing in business of a foreign
nation, it is necessary to find a profitable area of business. Japan possesses a large industry of
food and drink business. The sales from this industry is recorded to be approximately 45 trillion
Yen. The demand of food and drinks is growing at a rapid pace since 2007. However, the
demand has adversely affected during recession year of 2008. With stimulation in consumption,
spending demand regained. In 2013, the grocery and food consumption in Japan is recorded as
107 million tons making this area as an attractive place of business. Woolworths is a major
player in Australian supermarkets. With growth of other retailers such as Coles and Aldi the
company recently loses some of its market share in Australia. Therefore, the company is
considering expansion of its business in countries having a favorable business climate. The food
market in Japan is the second largest in Asia next to China. The reliance of Japan on imported
food items to meet domestic demand gives an opportunity to foreign companies to do business in
this area. Apart from a favorable demand condition, the paper considers general business
environment and the some important macro variables. These include economic growth, condition
of unemployment and inflation, real interest rate, government expenditure, fiscal and monetary
policy tools and finally the nation’s capacity to absorb shocks.

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Table of Contents
Introduction......................................................................................................................................3
Analysis and Discussion..................................................................................................................4
General Business Environment....................................................................................................4
Economic growth and business cycle..........................................................................................5
Unemployment............................................................................................................................7
Average wage rate.......................................................................................................................8
Human Capital...........................................................................................................................10
Inflation......................................................................................................................................11
Real Interest rate........................................................................................................................12
Government Expenditure in the Economy................................................................................14
Domestic Credit to Private Sector.............................................................................................15
Taxation Policy in Japan............................................................................................................16
Government expenditure on Infrastructure................................................................................18
Exchange rate regime and Exchange rate fluctuation................................................................19
Monetary policy in Japan...........................................................................................................21
Impact of Global Financial Crisis on Japan...............................................................................22
References......................................................................................................................................26

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Introduction
In the globalization era, countries are integrated with each other and this provides an
international platform for goods and services. In the integrated world, the investment decision in
one nation depends on macroeconomic environment of the targeted nation. The paper analyzes
feasibility of investment of Australia originated company Woolworths in Japan. The large food
and grocery market in Japan attracts Woolworths to start its business in Japan. The paper shows
the performance trends of Japan in macro indicator and its effect on long-term investment return.
The foremost important area is general business environment. The business environment
refers to the general structures of constriction permit, tax payment, and supply of credit, security
of property rights, exchange facilities and issue of insolvency. The most important macro
variable is economic growth rate that captures the productivity growth of the nation. High
growth rate implies economic prosperity while a low growth rate represents economic
slowdown. The related aspect of economic growth is the employment opportunity in the nation
and prevailing rate of unemployment. Wage rate of workers determine the industrial cost of
production and hence, is important for business. Credit supply determines the scope of business
expansion. The actual borrowing cost is determined from the real interest rate, which is nominal
rate minus the rate of inflation. Inflation resulted from demand side factors enhances economic
growth. In addition to autonomous macro variables, the role of government play an important
role in maintaining economic stability. Government intervenes in the economy using fiscal and
monetary policy tool. Government expenditures are captured under fiscal regulation. The
monetary policy is implemented using different money market instrument. The most commonly
used instrument is interest rate that determines the level of investment. The policy of taxation is
another instrument of fiscal policy tool. It is the only source of government revenue. The global

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financial crisis occurred in 2008 is a major event affecting many nations. The effect of global
financial crisis on a country indicates its shock resistance capacity and stability of the economy.
Woolworths holds an important position in Australian grocery supermarket. Japan on the
other hand comprises of a large food and drink market making Japan a lucrative place for
business investment. In the paper, some of the major macro variables in Japan is evaluated
including the general business environment. In terms of growing consumer demand and import
reliance of Japan, grocery retail business seems profitable. However, the final decision should be
taken only after complete evaluation of economic condition and its future prospects.
Analysis and Discussion
General Business Environment
Favorable business environment makes it easier to start up a business in the nation and
contributes to positive profit earnings in the long term. Before starting business all the necessary
aspects related to a business needs to be observed carefully. The important aspects here are
process of dealing with permission for new construction, property registration, easy mode of tax
payment and other necessary things such as credit availability, power supply and others specific
facilities. Japan has undertaken some reforms to make business operation easier.

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Table 1: Environment for business set up
(Source: The World Bank, 2017)
In 2013, Japan has reduced the corporate income tax rate for business expansion. Now, it
is less costly for companies to operate in Japan and enjoys a larger share of profit. The mode of
tax payment has made easier with introduction of technical specification on the platform of e tax.
The information of detailed tax structure is available is format of comma separated value
(CMV). One disadvantage in Japan is the costly structure of construction permit. The nation has
raised inspection fees that increases cost to the firms. Japan has established a new organization
named Enterprise Turnaround Initiative Corporation to deal with insolvency issue. It initiates
support to companies those are professionally managed but running with excessive debt.
Economic growth and business cycle
Economic growth is one of the major macro variables determining the state of economic
performance. Economic growth is measured in terms of change in Gross Domestic Product

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expressed as a percentage change from the previous year. GDP of the economy is not moves
along a smooth path rather it fluctuates. The spikes in the GDP growth rate is explained with the
phases of business cycle (Scarth, 2014).
Figure 1: Average annual growth rate in Japan and Australia
(Source: The World Bank, 2017)
Some similarities are observed in the trend growth rate of Japan and Australia. The
growth rate in Japan is comparatively higher than that of Australia until 1990. The difference in
growth rate between the two nations has narrowed overtime. After 1990s, growth rate in
Australia exceeds the growth rate in Australia.
In recent years, Japan has accounted a growth rate higher than the last two years. Growth
in Japan has sourced from a soaring in domestic spending. The unemployment remains at a low

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level increasing the confidence for business. The third largest economy in the world has recorded
a GDP growth rate of 4% in the second quarter of 2017 (Partington, 2017). In the previous
decade, Japan was struggling with a low growth rate. To improve the growth scenario, stimulus
is given in the form of easy bank lending, encouragement for investment from private companies
and boosts spending of consumers (Lockwood, 2015). The most significant factor contributing to
Japan’s GDP growth is the increasing consumer spending. This means Woolworths can have a
broad base of consumer demand in Japan.
Unemployment
The incidence of unemployment in the economy is described as a situation where some
members of the labor force fail to find jobs suitable for them. Unemployment is an important
macro indicator that symbolizes level of economic activity (Koba, 2014). High Unemployment
rate symbolizes a week economy implying slow spending and growth.
Figure 2: Unemployment in Japan
(Source: The World Bank, 2017)

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From 1998 to 2002 unemployment rate has increased sharply. After that the figures of
unemployment rate has decreased continuously until 2007. In the last five years, Japan has made
significant progress in improving the unemployment status. Unemployment rate has declined
sharply and reached to approximately 3.2%.
The falling unemployment rate shows a positive sign for the economy (Ehrenberg &
Smith, 2016). The rate of job less in the nation fell slightly. The availability of job as indicated
from the ratio of job offers and job seekers has remained at a stable level. Government in Japan
is encouraging the employers to boost wage (Kitov & Kitov, 2013). The increased wage has
direct effect on GDP through the channel of consumption spending. The shortage of labor is
prevalent non-manufacturing sector like nursing care and medical profession. There is a dramatic
fall in the figures of jobless people. This indicates a clear improvement in labor market
condition. The improved status of labor market is contribute from increasing job opportunities in
information technology, retail and wholesale sectors and construction (The Japan Times, 2017). .
The recovery of nation production and export demand have made positive contribution to the
labor market. The wage growth and land reform has reduced the tendency of overtime in the
labor market and secured an equitable behavior for regular and non-regular laborers.
Average wage rate
Wage is the return given to the laborers for their labor supply. The forces of labor
demand and labor supply determine the market wage rate. An excess supply of labor pushes
wages down while a shortage of labor increases the wage (Goodwin et al, 2013).

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Figure 3: Monthly average wage in Japan
(Source: Trading Economics, 2017)
Monthly wages in Japan has increased at a comparatively slow rate. In October 2016,
monthly wage was 295.62 JPY, which has slightly increased to become 301.704 in August 2017.
In Japan wage declined to 301.70 thousand JPY per month in August from 425.79 JPY in the
previous month. The average monthly wage is 321.06 thousand JPY between 1970 and 2017.
The recorded highest wage was observed in December 1997 when wages became 883.79 JPY
thousands. The all-time lowest wage rate is 52.91 JPY thousand as recorded in February 1970.
Various explanations for slow wage growth in Japan in given. The most recent
explanation given by the Bank of Japan is the higher productivity of worker and low hours of
working. Companies realize waste or labor and they have the ability to raise productivity and
hence output received per workers (Lise et al., 2014). They are adapting the policy of
abandoning low productive work to avoid extra labor cost. The reduced business hours restricts
wage growth by lowering labor demand. This has direct impact on the level of inflation in terms
of slowing the pace of inflation.

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Human Capital
The level of production in the economy depends on the quality of its labor force or
human capital. Human capital involves skill, education and training of the available labor force.
A nation, rich in human capital will constitute high productivity and high growth rate (Manuelli
& Seshadri, 2014). The level of education is reflected in its gross enrollment ratio.
Figure 4: Gross enrollment ratio of both sex
(Source: The World Bank, 2017)
The figure above shows the trend of gross enrollment ratio in Japan. The trends indicates
a steady rise in the gross enrollment. This suggests an improvement in the education level.

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Inflation
Inflation symbolizes a situation of continuous upsurge in the price level. The level of
inflation has significant importance for economic growth. A mild rise in the price level
encouraged the producers to produce more as they can earn a high profit (Galí, 2015). In times of
deflation, the economy shows a downturn.
Figure 5: Inflation trend in Japan
(Source: The World Bank, 2017)
No steady trend is observed in the price level. From 1960 to 1974 price level fluctuates
around 4%. In 1975, the price level reached to a recorded high level of 22%. Following that year,
price level started to decline at a rapid rate. The inflation rate fluctuates around 0 to 2 percent

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until 2008. In 2009, inflation rate declined largely and became negative. This had an adverse
impact on growth rate. Inflation rate then improved slowly (Nishizaki, Sekine & Ueno, 2014).
Price level though revived from its privies level, but still it lags behind the target level set
by Bank of Japan. Despite adaption of ease monetary policy, inflation rate below the target rate
of 2%. Inflation less energy and fresh food has remained at a flat level. Energy prices though
contributes to a rise in consumer price but it fails to push up the overall price level. In the
beginning of 2017, inflation rate in Japan has started increasing. This revitalization has fuelled
by the improved oil price and contributed to a boost in economic growth and the output gap
gradually shrinks. The concern remains, as the improved scenario is oil dependent. The focus of
the companies operating in Japan were to enhance productivity growth and make production cost
or wages as least as possible (Shioji, 2015). This trend has continued since last few decades,
resulting in a limited growth of wages. As income of the workers remain limited, demand is also
restricted. The economy lacks any inflationary pressure either from demand side or from cost
side. Bank of Japan sets a relatively low inflation target of 2%. However, still the economy is far
behind achieving its price.
Real Interest rate
Nominal interest rate is the cost of borrowing capital or return on investment in absolute
term. In the presence of price level, fluctuation real interest rate needs to be considered to trace
the actual rate of return. This is the real interest rate, which equals nominal rate less inflation rate
(Yi & Zhang, 2016). Hence, real interest rate depends on both the inflation rate and prevailing
nominal rate.

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Figure 6: Real Interest rate in China and Australia
(Source: The World Bank, 2017)
The real interest rate declines continuously in Japan. The interest rate is much higher in
Australia. This means cost of borrowing is much higher in Australia than that in Japan. The main
driving factor for low real interest rate is the persistently low inflation rate. In 2015, the set
interest rate was negative. Negative interest rate is a reversal of general economic rule. Here, a
fee is imposed by the central bank on commercial banks. The objective is to put the funds into
more productive use. So that the commercial banks can lend their money to business and
household. The central bank of Japan has adapted the policy of negative interest rate. The BOJ
has charged a fee of 0.1 percent on the portion of reserve they kept (Soble, 2016).

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The objective for such a policy is to surge consumer prices that have been declining over
the past few years. Declining prices have negative impact on company’s revenue. Firms fail to
raise wage of the workers and carry out further investment in new projects (King & Low, 2014).
The negative rates have made the money cheaper. However, the low rates fail to achieve the
targeted inflation rate. The economy still running with deflationary pressure that by itself reduces
the effectiveness of low interest rate. With a low price, firms refuse to take loans even at a very
low cost.
Government Expenditure in the Economy
Government expenditure in an economy is an important determinant of aggregate
demand. In times of low demand government increase investment to provide fiscal stimulus.
Government makes investment both in consumption and capital goods depending on the specific
economic scenario.
Figure 7: Government Expenditure in final consumption expenditure
(Source: The World Bank, 2007)

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Government expenditure in Japan is on an increasing trend. Japan is suffering with a
persistently low inflation rate. The consumption pending had shattered because of an almost
stagnant or slowly growing wage rate (Braun & Joines, 2015). In order to achieve economic
growth demand needs to be enhanced. Government has increased its expenditure to induce
consumption demand.
Domestic Credit to Private Sector
Domestic credit to private sector measures the financial assistance provided to the private
companies by domestic financial institutions. An increasing share of private sector credit
indicates a favorable condition for private companies (Lane & McQuade, 2014). Greater the
access to credit more companies are encouraged to start their business in the nation.
Figure 8: Domestic Credit to private sector in Australia
(Source: The World Bank, 2017)

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Figure 9: Government credit to private sector as a percentage of GDP
(Source: The World Bank, 2017)
Taxation Policy in Japan
The corporate tax structure in Japan divided companies under two categories – domestic
company and foreign company. Domestic companies are those having their headquarters in
Japan. Foreign companies are those not originated in Japan but only have their branch office in
the country. Tax on domestic companies are computed based on their income worldwide
(Hasegawa & Kiyota, 2017). The foreign companies are taxed on income gained from their
operation in Japan. The rate of corporate tax is same for a subsidiary as that for a branch. The

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standard tax rate is 23.4% as local standard and applicable to companies exceeding capital of 100
million JPY.
Other taxes that corporates have to pay are local inhabitant tax, local enterprise tax and
other effective tax rates. The local inhabitant tax differs based on size and location of the
company. Local enterprises tax rate is defined as one based on income and factor (Hayao, 2014).
There are three different components of factor-based taxation: a maximum tax rate of 3.6%
imposed on taxable profit with a progressive structure, a value added rate of 1.2% and 0.5% of
capital surplus and share capital. There is an effective tax rate of 30% applicable to a company
having paid in capital over 100 million JPY in Tokyo (The Japan Tax Site, 2017). The tax
liabilities of a foreign company is determined based on some factors. The first aspect is whether
the foreign company possesses a taxable presence in Japan as indicated by the ownership of a
permanent establishment. Once it is confirmed that the company has a permanent establishment
then then it is considered as a taxable presence, the nature of the taxable presence observed and
concerned to underlying source income in Japan.

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Figure 10: Tax revenue in Australia and Japan
(Source: The World Bank, 2017)
The tax revenue earned in Australia is much higher than that in Japan. This has obvious
implication that taxes in Australia is greater than the targeted nation giving another incentive for
investing in Japan.
Government expenditure on Infrastructure
Government makes infrastructural investment in areas such as water service, construction
or roads, communication facilities and such other. High investment in infrastructure implies
strong position of government and leads to inflow of foreign funds.

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:
Figure 11: Government investment expenditure on infrastructure in Japan and Australia
(Source: The World Bank, 2017)
Japan has considered huge investment for its infrastructural projects. The government
plans to invest beyond its traditional investments on roads and infrastructure considering an
ageing and shrinking population (Yoshino & Taghizadeh-Hesary, 2014). In 2013, the
government sanctioned 10 trillion yen for the new infrastructure projects. The amount is
equivalent to world’s investment on transport infrastructure every year. Government expenditure
is regarded as a remedy to ongoing weaker growth and deflation trend. With such huge
investment spending, many economists express concern that without improving growth potential
such investment will only result in huge government debt to the already indebted government
(Chen et al., 2015). The corresponding spending on infrastructure by Australian government is
relatively lower.

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Exchange rate regime and Exchange rate fluctuation
Exchange rate indicates relative price of country’ currency with respect to other country’s
currency. The movement of exchange rate determines the volume of trade and foreign
investment. It is assumed that a foreign firm maximize its profit by taking the exchange rate of
the host country in consideration subject to the source country of FDI (Amiti, Itskhoki &
Konings, 2014). The theory suggests depreciation of currency attracts inflow of foreign fund and
facilitates export of the host country.
Figure 12 : Exchange rate between Australian Dollar and Japanese Yen
(Source: Amiti, Itskhoki & Konings, 2014)
No stable trend is found in the exchange rate between Australian dollar and Japan’s yen.
This is because Japan change its exchange rate policy several times depending on the status of
the economy. Previously, the policymakers in Japan believed to depreciate currency in order to

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increase export. However, the policy is not very effective for Japan as consumers make their
purchase economically. This is the reason behind continuous deflationary pressure in Japan
despite expansionary monetary and fiscal policy. Moreover, the strategy of weakening yen
triggers a currency war that would to high global inflation worldwide and instability in the global
economy. In recent years, Japan has adapted the strategy of strengthening Yen (Katz, 2015). The
declining oil price reduces import bill in Japan turning the deficit trade balance to a surplus one.
This gives strength to Yen. The inflation rate is continuously falling in Japan. A low interest rate
means high real interest rate, strengthening the currency. However, Japan has went back to its
devaluation strategy seeing export as the means of regaining growth rate.
Monetary policy in Japan
Monetary policy is an instrument used by government to influence aggregate demand and
control inflation. The central bank adjust the available money supply to influence demand and
price level. The central monetary authority in Japan is Bank of Japan. BOJ sets the target of
monetary policy. The aim is to achieve stability in the price level. In order to control the price
level central bank influences interest rate thorough its operation in money market (Lee &
Werner, 2017). With the objective of achieving a price stability, the target is to ensure a sound
economic development.
The Japan’s economy is struggling with the problem of deflation. Bank of Japan set a
targeted inflation rate of 2 percent. In order to achieve this, BOJ sort to easing monetary policy
framework. In 2016, the central bank had kept its monetary policy unchanged for the last few
years. It has reduced its targeted inflation forecast for the years 2017/18 and 2018/19. The
interest rate has been kept on a hold to boost productive activity. The interest rate prevails at a
rate of minus 0.1 percent. The yield rate of bonds are above 0 percent. The decision of the

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monetary authority suggests it continuous stress on giving monetary policy stimulus to the
economy. This will continue until it attains the targeted 2 percent rate (Romer, 2014). The
economy is moving towards moderate expansion. The strategy boosts spending of both
household and corporate sector.
The Bank of Japan to combat deflation introduces a new monetary policy. The new
policy is based on the yield curve. This is the newest policy in the history of monetary policy
framework in Japan. Usually, BOJ uses the tool of negative interest rate as principal monetary
policy tool. Under the new policy, central bank has kept the ten-year bond rate at zero. Under
traditional policy, framework government usually focuses on the controlling short-term interest
rate. Now, bank intends to steepen its yield curve that can increase the difference between long
term and short-term yield of bonds. This is designed to free up more money to the commercial
banks and hence widens the investment base.
The policies so far undertaken has not been very effective in controlling deflation and
national debt in Japan remains high. The policy implementation is limited and some additional
stimulus is needed to fully implement the expansionary monetary policy and gears up the
economy.
Impact of Global Financial Crisis on Japan
The global financial crisis that stars in in United States has affected many other
economies worldwide. The crisis has arisen because of a crash in the property market and
affected the housing market of other nation. Housing market in Japan did not affect so much but
the crisis severely affected the economy of Japan. The effect is much harder in Japan than that in
US and or EU (Borio, 2014). The growth fell steeply because of a sharp decline in external
demand. The decline in US demand manifested in Japan. The downturn in the external sector is

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not limited to Japan- US trade relation but the effect is more intensive. The export demand for
intermediate good flows to Asian countries also reduced significantly.
Japan GDP contracted at a rate that is more than double of United States. Prior to crisis
countries such as Japan, Taiwan and South Korea were engaged in exporting key components
such as China, Vietnam and Thailand, which exported final goods to the United States. The trade
triangle was likely to benefit the entire involved nation. At times of crisis, because of a slow
growth rate US reduced its import. The decline in import demand leads to a considerable decline
in exports of these countries.
The basket of Japan’s exported good mainly comprises of durable consumer goods and
capital goods like electric machines, cars, machine tools and parts. The investment in capital
goods such as plants equipment have declined following global downturn during 2008 (Chang et
al., 2013). The global demand had shifted from high-end expensive goods to cheap products.
This intervention and transformation of demand badly affected Japan’s export.
The effect of global financial crisis on Japan was not realized at immediate instances.
Until fourth quarter of 2008, the trade scenario remained unchanged. However, when the effect
was realized then the adverse effect GDP was very large.
At times of global economic crisis, the currency appreciated. In 2008, Yen was nearly
106% of its average in 2007. In 2009, it reached to 136%. Whenever currency appreciates,
import becomes cheaper and boosts imports. This has an adverse impact on export by making
export costlier. The dual impact of decline in global demand and yen appreciation largely
reduces Japan’s export in fourth quarter of 2008.

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Conclusion and Recommendation In this report, the investment decision of Woolworth in Japan
is evaluated with focus given on general business environment as well as trends of some major
macro variables. Japan welcomes private and foreign business in terms of providing different
facilities like reduction in the corporate tax rate, focus on insolvency issue and settling a general
body of corporation to look after different aspects related to business. These facilities will ease
Woolworth’s investment in Japan. The genera business environment is not the only factor to be
considered. The growth in Japan is slower than that of the Australia. The slow growth in Japan
is resulted from low demand in the external sector, deflationary pressure in the economy and
crisis in the financial sector. However, the growth is gradually reviving resulted from a rise in
household spending. Household spends a significant portion of their income on food or grocery
items. This is beneficial for Woolworth as it is going to face large consumer demand for their
products. The recent trend of unemployment shows a declining trend. The gain in production
activity and hike in export demand created many new job openings and helped to maintain a low
unemployment rate. Another advantage of opening business in Japan it its falling wage rate. The
firms in Japan has focused on reducing their cost of production by enhancing productivity. Low
wage cost helps to start up a new store in Japan’s market by keeping operation cost low. The
human capital investment in Japan is increasing because of an aging and shrinking population
base. This is reflected from the rising trend of gross enrollment ratio. A cause of concern for
Japan is its continuously declining inflation rate. The low price level restricted economic growth
by restricting further investment. Bank of Japan has taken several steps to overcome the
deflationary trend and revitalize the economy. Some improvement has already occurred but
many is yet to come. Real interest rate in Japan is at a much lower level than that in Australia.
The real interest rate is even negative in recent years followed by the central Bank’s policy of

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charging a negative interest rate to encourage investment. This indicates doing business in Japan
is advantageous with a low borrow cost. Government is also supportive to private business. The
availability of domestic credit to private sector shows an increasing trend. Japan maintained a
well-defined tax structures for both domestic and foreign companies. The tax for foreign
companies are computed based on their income sourced from Japan. The tax revenue earned in
Australia is greater than that earned in Japan over the sane tine horizon. This has indication that a
high as rate exists in Australia over Japan and give an additional edge of investing in Japan. A
considerable investment on infrastructure is made by Japan attracting more investment. The
exchange rate policy in Japan has gibes through phases of depreciation and appreciation.
Currency depreciation is seen as a way of boosting export and counter deflation. To prevent yen
appreciation BOJ has maintained a negative interest rate. As far as monetary policy is concern,
central bank of Japan intends to maintain a stable policy and achieve a targeted inflation rate. In
an attempt to achieve inflation target easing monetary policy is adapted. The objective is to
increase money supply in the economy and attains a stable GDP growth rate. The global
financial crisis affected Japan through the Channel of external sectors. The declining export
demand from US and other Asian countries resulted in a massive decline in the net export
balance. However, because of the strong financial sector the housing market remained unaffected
unlike most of the economies.
It is recommendable for Woolworth to invest in grocery market of Japan. It is true that
average wage in Japan is falling down and this reduces overall demand of the consumers.
However, food and grocer items have inelastic kind of demand. Japan has a broad consumer
base. Australia is one of the top three exporters of food items in Japan. Therefore, demand of
food items likely to be less affected. The low wage will help the company to hire labors at a low

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cost. Bank of Japan helps the business by lowering the interest rate. This benefits the investors to
borrow funds at a relatively cheap rate. The slow growth of prices can be a concern for the
company but it is expected that Japan will soon overcome from this phase. The depreciated yen
will increase export demand and increase sales. Finally, the unaffected housing market of Japan
in times of global financial crisis indicated strong and stable financial position of Japan.

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