Introduction to Japanese Economy

Final Examination February 2017

Ryoichi Imai

2017/01/23

Answer to all the questions. The answers must be simple and short. A simple copy of my lecture note will be downgraded. Follow the following instruction.

1. Convert your file to a PDF format (.pdf).

2. Name the file as< LAST-First-Course title> like <YAMADA-Taro-Economy>

3. Upload your pdf file to my JTW-economy folder at the file sharing system of the Kyushu University by Wednesday, February 8. No late submission will be accepted

4. I will tell you the password in the last class.

5. Do not send your work by e-mail. Do not bring it to my office in a USB memory. Thank you for your cooperation

The Lost Decade: True or False?

Is each of the following statements True or False? If it is false, replace the wrong word(s) with correct one(s). such as "Bush -> Obama".

1. Under the Bretton-Woods system, the United States had an obligation to stabilize the price of gold, while other countries were responsible to maintain the price of silver.

2. In 1971, the US president Carter announced that the US had suspended the convertibility of gold with US dollar.

3. The Smithonian agreement set the value of US dollar at 280 yen.

4. The US president Reagan was once a comedian before he became a politician.

5. The Twin deficits under the Reagan administration made the Yen appreciate against US dollar.

6. In 1985, the financial authorities of the 5 major countries met at NY and agreed that the US dollar should depreciate down to 240 yen.

7. The Ever-Appreciating Yen Syndrome hypothesis argues that the Japanese Yen is undervalued if the actual value of the US dollar is lower than its PPP level. 

8. Japan raised the general VAT rate to 5% in 1995. 

9. The 1997 currency crisis was harsh, especially for Thailand, Malaysia, China, and Korea.

10. Korea finally protected its currency from devaluation, thanks to the currency board system.

11. Brazil introduced dollarization to stabilize its price level, but failed eventually.

12. Prime Minister Koizumi was supported by his economic minister Ono Yoshiyasu.

13. Koizumi's political goal was to privatize the National Railroad.

14. The financial crisis was the most serious, when the economic minister Ono took a drastic policy to clean up the unperformed loans in 2003.

15. The Credit-Crunch hypothesis argues that the weak companies financially supported by the banks reduced the productivity of the Japanese economy in 1990s.

16. The BIS regulation on banks' equity ratio mandated the banks that are engaged in international business to maintain their equity ratio higher than 10%.

17. The Zombie hypothesis argues that Japanese firms were weakened by the financial difficulty caused by the bad loan problem.

18. The Koizumi cabinet privatized the FILP in order to destroy the Zombie firms and enable the strong recovery of the Japanese economy. 

19. The Lehman Brothers were called as the "dream team", because the leading traders and the Nobel-laureate scholars joined it.

20. The subprime crisis was caused by the soaring energy price in 2008.

Corporate Governance

21. Katsuhito Iwai says that the nature of corporation has "duality". Explain this.

22. Describe the contrast between the corporate nominalism and realism

23. How does the pyramidal system of shareholding work in the contemporary corporate governance? Discuss examples.

24. How does the cross-shareholding work in the contemporary corporate governance? Discuss examples.

25. What is the Horiemon-Livedoor case? What does it suggest for corporate governance in Japan?

Understanding Inequality and Secular Stagnation

Read the following articles and answer to the questions

A. Taxing the 1%: Why the top tax rate could be over 80%

26. "there is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares " What does this mean?

27. There are three hypotheses to explain the recent rise in the top 1% income share. What is the first hypothesis, and how much is the optimum highest income tax rate according to the hypothesis? 

28. What is the second hypothesis to explain the concentration of pre-tax income to the top 1%?

29. What is the third hypothesis to explain the concentration of pre-tax income to the top 1%?

30. What does Figure 2 show?

31. "The top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model." Why?

32. What are "the Reagan and Thatcher revolutions "?

B. Public policy in a zero-growth scenario

33. "There has been a structural transition to minimal, essentially zero, per-capita growth". What is the first evidence to suggest this transition to be occurring?

34. What does Figure 2 suggest?

35. What does Figure 3 suggest?

36. What has caused "a steady rise in the ratio of household debt to income"?

37. "The short-term boost to consumption would ultimately result in a net reduction of wealth, depressing future spending capacity once households adjust their expectations" Why?

38. "Lowering the cost of capital, by itself, does not boost innovation" Why?

C. Servitisation and manufacturing firms without factories in Japan

39. What are the FGPs? List the leading FGPs in Japan.

40. What types of firms does the author select as the comparable non-FGPs?