logo

Macroeconomics Assignment | Economics Assignment

   

Added on  2020-05-08

32 Pages6992 Words56 Views
Running head: MacroeconomicsMacroeconomicsName of the StudentName of the UniversityAuthor note

MACROECONOMICS1Executive SummaryThe report evaluates the effect of major macroeconomic variables on investment decision offirm. Australia maintains a good trade and investment relation with many nations. Japan is onenation with which Australia shares a good relation. Before investing in business of a foreignnation, it is necessary to find a profitable area of business. Japan possesses a large industry offood and drink business. The sales from this industry is recorded to be approximately 45 trillionYen. The demand of food and drinks is growing at a rapid pace since 2007. However, thedemand 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 as107 million tons making this area as an attractive place of business. Woolworths is a majorplayer in Australian supermarkets. With growth of other retailers such as Coles and Aldi thecompany recently loses some of its market share in Australia. Therefore, the company isconsidering expansion of its business in countries having a favorable business climate. The foodmarket in Japan is the second largest in Asia next to China. The reliance of Japan on importedfood items to meet domestic demand gives an opportunity to foreign companies to do business inthis area. Apart from a favorable demand condition, the paper considers general businessenvironment and the some important macro variables. These include economic growth, conditionof unemployment and inflation, real interest rate, government expenditure, fiscal and monetarypolicy tools and finally the nation’s capacity to absorb shocks.

MACROECONOMICS2Table of ContentsIntroduction......................................................................................................................................3Analysis and Discussion..................................................................................................................4General Business Environment....................................................................................................4Economic growth and business cycle..........................................................................................5Unemployment............................................................................................................................7Average wage rate.......................................................................................................................8Human Capital...........................................................................................................................10Inflation......................................................................................................................................11Real Interest rate........................................................................................................................12Government Expenditure in the Economy................................................................................14Domestic Credit to Private Sector.............................................................................................15Taxation Policy in Japan............................................................................................................16Government expenditure on Infrastructure................................................................................18Exchange rate regime and Exchange rate fluctuation................................................................19Monetary policy in Japan...........................................................................................................21Impact of Global Financial Crisis on Japan...............................................................................22References......................................................................................................................................26

MACROECONOMICS3Introduction In the globalization era, countries are integrated with each other and this provides aninternational platform for goods and services. In the integrated world, the investment decision inone nation depends on macroeconomic environment of the targeted nation. The paper analyzesfeasibility of investment of Australia originated company Woolworths in Japan. The large foodand grocery market in Japan attracts Woolworths to start its business in Japan. The paper showsthe 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 environmentrefers to the general structures of constriction permit, tax payment, and supply of credit, securityof property rights, exchange facilities and issue of insolvency. The most important macrovariable is economic growth rate that captures the productivity growth of the nation. Highgrowth rate implies economic prosperity while a low growth rate represents economicslowdown. The related aspect of economic growth is the employment opportunity in the nationand prevailing rate of unemployment. Wage rate of workers determine the industrial cost ofproduction and hence, is important for business. Credit supply determines the scope of businessexpansion. The actual borrowing cost is determined from the real interest rate, which is nominalrate minus the rate of inflation. Inflation resulted from demand side factors enhances economicgrowth. In addition to autonomous macro variables, the role of government play an importantrole in maintaining economic stability. Government intervenes in the economy using fiscal andmonetary policy tool. Government expenditures are captured under fiscal regulation. Themonetary policy is implemented using different money market instrument. The most commonlyused instrument is interest rate that determines the level of investment. The policy of taxation isanother instrument of fiscal policy tool. It is the only source of government revenue. The global

MACROECONOMICS4financial crisis occurred in 2008 is a major event affecting many nations. The effect of globalfinancial 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 theother hand comprises of a large food and drink market making Japan a lucrative place forbusiness investment. In the paper, some of the major macro variables in Japan is evaluatedincluding the general business environment. In terms of growing consumer demand and importreliance of Japan, grocery retail business seems profitable. However, the final decision should betaken only after complete evaluation of economic condition and its future prospects. Analysis and DiscussionGeneral Business Environment Favorable business environment makes it easier to start up a business in the nation andcontributes to positive profit earnings in the long term. Before starting business all the necessaryaspects related to a business needs to be observed carefully. The important aspects here areprocess of dealing with permission for new construction, property registration, easy mode of taxpayment and other necessary things such as credit availability, power supply and others specificfacilities. Japan has undertaken some reforms to make business operation easier.

MACROECONOMICS5Table 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, itis less costly for companies to operate in Japan and enjoys a larger share of profit. The mode oftax 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 hasraised inspection fees that increases cost to the firms. Japan has established a new organizationnamed Enterprise Turnaround Initiative Corporation to deal with insolvency issue. It initiatessupport to companies those are professionally managed but running with excessive debt. Economic growth and business cycleEconomic growth is one of the major macro variables determining the state of economicperformance. Economic growth is measured in terms of change in Gross Domestic Product

MACROECONOMICS6expressed as a percentage change from the previous year. GDP of the economy is not movesalong a smooth path rather it fluctuates. The spikes in the GDP growth rate is explained with thephases 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. Thegrowth rate in Japan is comparatively higher than that of Australia until 1990. The difference ingrowth rate between the two nations has narrowed overtime. After 1990s, growth rate inAustralia exceeds the growth rate in Australia. In recent years, Japan has accounted a growth rate higher than the last two years. Growthin Japan has sourced from a soaring in domestic spending. The unemployment remains at a low

MACROECONOMICS7level increasing the confidence for business. The third largest economy in the world has recordeda GDP growth rate of 4% in the second quarter of 2017 (Partington, 2017). In the previousdecade, Japan was struggling with a low growth rate. To improve the growth scenario, stimulusis given in the form of easy bank lending, encouragement for investment from private companiesand boosts spending of consumers (Lockwood, 2015). The most significant factor contributing toJapan’s GDP growth is the increasing consumer spending. This means Woolworths can have abroad base of consumer demand in Japan.Unemployment The incidence of unemployment in the economy is described as a situation where somemembers of the labor force fail to find jobs suitable for them. Unemployment is an importantmacro indicator that symbolizes level of economic activity (Koba, 2014). High Unemploymentrate symbolizes a week economy implying slow spending and growth. Figure 2: Unemployment in Japan(Source: The World Bank, 2017)

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Paper on the Importance of Different Macro Variables
|44
|9608
|63

Assignment on Macroeconomic Environment of Australia
|19
|3617
|26

BUS700 Economic Assignment: Macroeconomic Performance
|14
|3724
|40

Economics Exam: Difference between Macro and Micro Economics, Monetary and Fiscal Policy, Types of Growth, Domestic Policy
|8
|2246
|176

Doing Business in China - PDF
|34
|9156
|31

Macroeconomic Policy Assignment Report
|4
|745
|16