Minimum Wage Japan'S Hazy Future

Japan impacts the USA vastly. Being the US’s 4th largest supplier of goods, it generates about $136.5 billion dollars of the USA’s goods (“Japan”). The United States has a large dependency on Japanese products. For example, automotive goods and high-technological electronic goods are a big component of Japanese products that the United States depends on. Industrial equipment is generally brought over from Japan like machinery tools and electricity-generating turbines (Klayman, 2011). The United States industrial industry has heavy dependency on Japanese equipment proving how big of an impact Japan imports have on the United States economy as a whole and how its reliance has for more significance than just imported goods. It stands on the basis of American production and how the industry has to depend on Japanese goods for its progress and growth within its own economy.

Allowing for better goods that can help American production, it proves just how significant Japan’s relation with the United States is. It allows for maximization in industrial goods and allows for American production to be more efficient. Now, if the United States can be more efficient in industrial production it can produce more revenue out of its labor force and manage to keep prices flexible to its consumers. Technological advancements and investments allow for a country to be more efficient and overall bring economic expansion and growth as a whole. Allowing for consumers of these products to be more accessible and perhaps cheaper. While also creating Production Efficiency which can reduce the number of workers it may hires and/or improve their productivity as a whole bringing in profits for the companies while also being able to lower prices. However, this works vice versa. Japan also relies heavily on American imports. Japan’s recent issue of being able to find area to grow agriculture has caused an overall problem. With only 13% of the land being suitable and readily available to grow and feed their agricultural industry- it is in need of America’s great agricultural industry. With 37% of beef coming from America- Japan’s reliance for American goods is prevalent (Wortley, 2018). Feeding its own country and providing their food at a lower cost than it would take Japan to produce it promotes efficiency on both spectrums. According to the USDA 25 percent of Japan’s agricultural imports come from the United States as well (Marie, 2017).

It seems as though Japan can benefit from feeding its people with American production of agriculture. Japan has been said to be the biggest market consuming American products. Considering Japan’s land restricts them from being able to be as efficient as they’d like to be in agriculture production and even restrict them from being able to grow certain crops- it seems reasonable that they would want to trade agricultural product with Japan. Both countries are beneficent to each other, allowing accessibility and efficiency where it is lacked by each. As of 2018, Japan’s minimum wages averages at 848 Japanese Yen or $7.50 USD. A growth of 3% per year since 2015- Japan seeks to close the labor shortage crisis it is facing and encourage more people to work (Staff, 2018). As we know, raising minimum wage may induce prices to spike higher or in other words inflate. Japan hopes to control its inflation from getting out of control and out beating inflation by short term investments. Short-term investments are able to open up the possibility of a more efficient economy and work force.

Aside from being paid more, workers are more efficient through improvements in companies and technologies readily available to them than can prompt profits for the company and spare them from having to rise prices too high to offset the growing compensation it must pay its workers. However, Japan still struggles in catching up to the global minimum wage. Comparing to the United States whose federal minimum wage has grown from $7.25 to $10.35 from 2009 to 2018 (Doyle, 2018). Japan plans to size up its labor force due to an aging population leading to a decrease in the labor force in the near future. While many are retiring, boost in the labor force is needed to keep its tight unity and low unemployment rates- through a 2.4 percentage of unemployed in Japan, we can consider the country near full capacity. Japan’s GDP Japan holding the third ranking position in both Nominal GDP and Real GDP- Japan’s current GDP stands at 4.873 trillion USD (“Japan GDP”). Slightly behind the 2 world’s biggest super powers the United States and China, this is a good indicator that it does not lack potential and economic prosperity as opposed to many other countries ranking below.

Japan’s annual growth rate stands at an average of 1.7 percent growth per year from the years 1997 – 2017. As we progress into 2018 however, GDP growth has been shown to be much larger. Recently being sized down to 2.5 percent from recent national incidents- it still had been a great increase from 2017s reports. The recent size down had been attributed to the natural disasters such as an earthquake and a typhoon causing massive floods and destruction. Natural disasters have the capacity to slow down the economy through the slowdown of exports, taking profits from corporate, and overall change in the exchange rate between countries (Locket and Harding, 2018). Unemployment Rate & Literacy Rate While the unemployment rate is currently standing at a 2.4% as of January 2018, one of the lowest points as of 1993 post the financial crisis Japan endured- however they’ve also managed to maintain it under 3 percent since 2017 (Kyodo, 2018). A great progress to Japan and its labor force reaching near maximum capacity. Considering that typical natural unemployment rates stand between 3 percent to 5 percent it is quite a step for Japan and its representation of the work force. Job openings have recently exceeded the people looking for work- showing a promise of the labor forces ability to still expand. With a 99 percent literacy rate from ages 15 and up, nearly everyone able to work is competent for a job (“Japanese Education and Literacy”). Education is strictly enforced and while it may create a competitive ambience in Japan’s education systems, it creates better futures where nearly everyone will be prepared to read and write. In other news, Japan’s recent implications of wage growth may be a slow down for the economy.

President Abe has been asking for a 3 percent wage raise yearly- and that implicates a shaky outlook for the country considering that inflation still isn’t growing at the rate expected. Japan still manages to struggle with depreciation despite the unemployment rates reaching such low percentages. President Abe’s goal has been to reach 2% inflation growth annually but throughout the 15 years of deflation they have failed. Conflicted with pumping up inflation, Japan finds itself in a tough situation dealing with a tight labor force but minimum success in recouping its currency to a healthy state. However, as stated earlier, Japan plans to regenerate from its rising minimum wage by short-term investments that can lead to a more efficient economy as a whole (Siripala, 2018). As Figure 3 shows, the raise of minimum wage increases has promoted a decrease in the unemployment rate. This may be from the incentivizing wages and the rising price of products that to government has done to increase its workforce.

Japan’s desperate need of fixing their deflation issues has brought them to the implementation of ideals from the schools of economics. Japan is implementing a lot of policies under their President Abe. Abe seeks to fix the country’s main economic struggle of deflation, by presenting “Abenomics” where he proposes plans and implementations to help fix the economic situation. Under President Abe fiscal expansionary laws, monetary easing, and structural reformations are undergoing to regain strength in the economy (McBride and Xu, 2018). Demand and GDP growth are the main goal of this economic abilities to increase the inflation of the country by at least two percent. Abe focuses on fiscal stimulus, creating projects for its citizens to work on or in other words he promotes government spending. However, Abe has created the second largest government spending the country has ever seen. A typical Keynesian view of bringing economic growth. Abe’s new focuses also are largely on monetary policies in which the government can purchase government securities amongst other types of securities that can hopefully bring down interest rates and incentives spending (Jagerson, 2018). Approximately $660 billion dollars are spent annually in acquiring assets. And this has been a repeatedly done tactic to boost inflation. Government spending has increased from reports of 2006 which had government spending and intervention at 500 billion dollars annually to nearly 700 billion dollars annually in the las 10 years (Iwamoto, 2006). As we know the GDP C + I + G + (X – M). Nearly 70 percent of acquired assets reflected on the GDP are owned by the government now (McBride and Xu). Yet they still lack on promoting inflation within the country. Figure 4 shows the inflation rate in the past 5 years and how if anything inflation has slowed down instead of sped up. The inflation target of 2% per year has not been met since the implementations and efforts by President Abe.

The final implementation from President Abe has been his so called structural reform. Structural reformed lays in the midst on cutting down business regulations, cutting corporation taxes, and promoting the diversity in the workforce in order to promote a more liberal labor market which would hopefully revive business competitiveness. With a majority of Japan’s population decreasing due to aging and the younger population having less people- Abe has launched the structural reform in hopes of bringing the economy back from a labor shortage which they are currently experiencing. Despite Abe’s efforts for the past 5 years, inflation has remained significantly low. The efforts of all these economic policies and reformations seem to be elusive, leaving no real significant sign of progress on fixing problem within wage growth, national debt, currency depletion, and the overall struggle of stimulating economic development and pushing for GDP growth. New complications as well with the US as a trading partner have opened up as well under Presidency of Donald Trump. A partner that we know helps Japan in many ways may soon not be so helpful anymore. The same continuous economic problems are still well and alive in Japan and although known as a very prosperous country could be in trouble for the future to come.

With risks of hyperinflation and debt soaring to nearly 11 million- Japan has quite a hole to dig itself out of with a debt to GDP ratio of nearly 234% which has been said to be unpayable (Dillain, 2017). However, these Keynesian policies are not the first to be put in practice and may follow a positive trend in the near future. Japan holds real potential and despite their economic struggles are able to provide commodity and comfortability for its residents. While many will say Japan still has a long way to go, it has held its ground quite well with the growth of superpowers and maintaining relations with them.

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Minimum Wage Japan'S Hazy Future. (2022, Sep 26). Retrieved April 19, 2024 , from

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