have caused the countryÆs adjustment process to be slow (Shachmurove 47). Due to Japanese industry and trade policies, there is also an inefficient resource allocation that adversely affects adjustment processes (Shachmurove 47). The Ministry of International Trade and Industry (MITI) uses four basic policy tools:
Specific laws aimed at specific industries, such as providing tax incentives
The Foreign Exchange and Foreign Trade Law protects targeted industries from foreign competitors through government regulations.
Gyoseishido (administrative guidance), which is governmental advice for the private sector. This guidance is not legally binding, but companies must obey MITI to avoid possible punishments.
Subsidized loans by government organizations such as the Fiscal Investment and Loan Program and Japan Development Bank are used (Shachmurove 47).
MITI has taken the strongest stand for liberalization of all the regulatory ministries, and it also represents constituencies on both sides of the controversyùthe beneficiaries and the victims of protection and regulation (Vogel). MITI balances and coordinates these disparate interests and structures some bargains across industries (Vogel). However, ôMITI lacks credibility as a lead reformer, for it is responsible for some of the most heavily regulated industries of all, including energy and retailö (Vogel).
Thanks to globalization, JapanÆs political environment is not the only one that affects its economy; the United States also has protectionist industry policies such as ôtax incentives, foreign aid tied to the procurement of American products and military sales credit, input subsidies, R&D subsidies, and the Buy American act,ö all of which distort the consumption pattern (Shachmurove 47).
The balance of trade between Japan and the United States has been influenced by informal as well as formal barriers to trade (Shachmurove 48). That balance has deterior...