ECONOMIC PRINCIPLES and Japanese Business

This research examines the application of economic principles in the conduct of business in Japan. The findings of this examination are presented in discussions of demand, supply, market structure, and government regulation of business.

Demand may be considered in several contexts. In this examination, demand is addressed primarily with respect to consumption. From 1969 through 1979, the average rate of growth attained by the Japanese economy was five-percent. Since the end of 1979, however, the Japanese economy has not attained a five-percent rate of growth for any full calendar year. For each year since 1979, however, the Japanese economy has recorded some level of growth between two- and five-percent.

The Japanese economy is not as heavily consumption oriented as is the American economy. Rather, the Japanese economy is oriented toward the export of a high proportion of the goods produced in that country. The American economy, by contrast, is heavily oriented toward domestic consumption.

Private consumption accounts for approximately 51 percent of Japan's gross national product (GNP), compared to about 60 percent in the United States (US). Japanese public consumption accounts for 8.7 percent of GNP, compared to about 17 percent in the US, while investment in Japan accounts for approximately 29 percent of GNP, compared to about 17 percent in the US. Exports account for approxi

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-to-64 years of age). Labor force growth is less than one-percent per year. Unemployment is not a serious problem, and has traditionally not been a significant problem. One of the reasons for this state of affairs is the country's lifetime employment policy. The lifetime employment policy is not practiced by all Japanese employers, but it is practiced by most major employers. Japanese labor relations policies are typically viewed by Americans as being mistaken. In Japan, wages are closely tied to seniority, and salary differentiation by rank and grade are small. Young managers must wait years for promotion, retirement is early, the employment system discourages company switching, and it is difficult to get fired. Almost everything about Japan's management of labor is wrong according to conventional American economic wisdom; yet it is the Japanese who are achieving the greatest productivity gains. Market Structure American economic doctrine decries the creation of cartels and the practice of vertical integration. In Japan, however, each concept is accepted and incorporated into the market structure of the economy. The keiretsu is a vertically integrated megacompany. Major Japanese manufacturers seldom seek out the
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Approximate Word count = 1527
Approximate Pages = 6 (250 words per page)

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