Japanese Economic Policy（オックスフォード大学）

Hilary/Trinity Term 2012

Nissan Institute of Japanese Studies

School of Interdisciplinary Area Studies

University of Oxford

Instructor:

Hiroaki Matsuura

Email: hiroaki.matsuura@nissan.ox.ac.uk

Class Meeting: Monday 11AM-1PM

Course Description

This course analyzes major issues in the contemporary Japanese economic policy, including taxation, social security, health care reform, human capital policy, environmental policy, monetary and fiscal policy, and trade and exchange rate management. The course emphasizes four questions regarding the role of the government in a market economy: (1) What is the economic rationale for government intervention in the economy; (2) How to evaluate what types of intervention are more appropriate than the other; (3) Who are the winners and losers from government intervention; and (4) Do the benefits of intervention exceed the costs? Current economic issues and policy options in Japan are discussed in detail and in the context of recent economic research.

There will be a set of eight two-hour classes in Hilary Term and four two-hour classes in Trinity Term.

Prerequisite: No prerequisite is required. Basic economic concepts are taught in lecturers and classes.

The text book used in this course is: David Flath, The Japanese Economy (DF here after) Oxford University Press, 2005.

I also recommend: Takatoshi Ito, The Japanese Economy, MIT Press 1992.

These textbooks provide excellent overviews of the Japanese Economy, but unfortunately they are a bit old for the purpose of this course. Extensive use will be made of other materials which will be mostly available online in order to examine the current economic challenges in Japan.

We will be also reading some chapters from the following book: Takero Doi and Toshihiro Ihori, The Public Sector in Japan, Edward Elgar, 2009 (DI here after).

Course Requirement

The main assessment will be through three-hour examination in the Trinity Term.

All students will be required to submit a piece of written work for assessment by the end of week 4 of the Hilary Term in which the classes are taught. Detail will be given during the first class of the term.

Course Schedule

I. Long-Run: Post-war Economic Growth

Week 1.A. A Brief Overview of Economic Growth Theory

Week 1.B. Growth Accounting and Asia’s Miracle

Krugman, P. (1994) “The Myth of Asia’s Miracle,” Foreign Affairs, Vol. 73, No. 6, November/December, pp. 62-78. http://media.ft.com/cms/b8268ffe-7572-11db-aea1-0000779e2340.pdf

Jorgenson, D. and K. Vu (2011) “The Rise of Asia and the New Economic Order,” Journal of Policy Modeling, Vol. 33, Issue 5 September-October, forthcoming.

http://www.economics.harvard.edu/faculty/jorgenson/files/Jorgenson-Vu%2BRise%2Bof%2BAsia_11_0608.pdf

Week 2.A. Post-war Economic Growth in Japan

DF, Chapter 4 (*2 and 3 only if you are interested in history)

Jorgenson, D. and K. Nomura (2007) “The Industry Origins of the U.S.-Japan Productivity Gap,” Economic Systems Research, Vol. 19, No. 3, September, pp. 315-335. http://www.economics.harvard.edu/faculty/jorgenson/files/IndustryOriginsUS_JapanProductivityGap_EconomicSystemsResearch.pdf

*Denison, E. and W. Chung (1976) "Economic Growth and Its Sources," in Hugh Patrick and Henry Rosovsky, ed., Asia's New Giant: How the Japanese Economy Works (Washington: Brookings Institution) pp. 63-151.

*Ito, T. (1992) “Economic Growth,” Ch. 3 in The Japanese Economy, Cambridge, MA, The MIT Press, pp. 43-76

*Hayashi, F. & K. Nomura (2005) "Can IT be Japan's savior?," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 543-567, December.

*Arora, A., Branstetter, L. G. & Drev, M. (2010) “Going Soft: How the Rise of Software Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley.” National Bureau of Economic Research Working Paper Series, No. 16156

Beason, R. and D. E. Weinstein (1996) “Growth, Economies of Scale, and Targeting in Japan (1955-1990),” Review of Economics and Statistics

*Weinstein, D. E. (1995) “Evaluating Administrative Guidance and Cartels in Japan (1957-1988) Journal of the Japanese and International Economies Volume 9, Issue 2, Pages 200-223.

II. Short-Run: Period of Economic Depression

Week 2B. A Brief Overview of Fiscal and Monetary Policy

Week 3.A. Lost Decades

DF, Chapter 6

Hamada, K. and Y. Okada (2009) “Monetary and International Factors behind Japan’s Lost Decade,” Journal of the Japanese and International Economies, Vol. 23, Issue 2, June, pp. 200-219.

International Monetary Fund (2011) “Did the Plaza Accord Cause Japan’s Lost Decades,” in Ch. 1, World Economic Outlook, Washington, DC, International Monetary Fund, April, pp. 53-55. http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf

Hoshi, T. and A. Kashyap (2011), Why Did Japan Stop Growing? National Institute for Research Advancement (NIRA), Tokyo

*Kwon, H., F. Narita and M. Narita (2009) “Resource Reallocation and Zombie Lending in Japan in the‘90s,” RIETI Discussion Paper Series, 09-E-052.

*Caballero, R; T. Hoshi and A. Kashyap (2008), “Zombie Lending and Depressed Restructuring in Japan”, American Economic Review, 98, 1943-1977.

*Peek, J and E. Rosengren (2000), “Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States,” American Economic Review, 90, 30–45.

Week 3.B. Macroeconomic Policy during the Depression

Ito, T and H. Patrick (2005) “Problems and Prescriptions for the Japanese Economy,” Ch. 1 in T. Ito, H. Patrick, and D. E. Weinstein, eds., Reviving Japan’s Economy, Cambridge, MA, The MIT Press, pp. 1-38.

*Ito, T. (2009) “Fire, Flood, and Lifeboats: Policy Responses to the Global Crisis of 2007-09,” San Francisco, Federal Reserve Bank of San Francisco, October. http://www.frbsf.org/economics/conferences/aepc/2009/09_Ito.pdf

Hamada, K. (2010) “How to Save Japan from the Global Financial Crisis,” Tokyo, International House of Japan

III. Population and Economy

Week 4.A. A Brief Overview of Public Economics

Week 4.B. Education, Human Capital, and Labor Market

DF, Chapter 15, Chapter10 (Education pp. 226-227)

Yamada, K. and D. Kawaguchi (2012) “Changing Unchanged Inequality: Higher Education, Youth Population, and the Japanese Seniority Wage System”, Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd12-243.pdf

Kondo, A., Y. Genda and S. Ohta (2010) “Long-term effects of a recession at labor market entry in Japan and the United States”, Journal of Human Resources

*Kondo, A. (2007) “Does the First Job Really Matter? State Dependency in Employment Status in Japan”, Journal of the Japanese and International Economies, 21, pp379-402.

*Mano, Y and E. Yamamura (2010) “Effects of Husband’s Education and Family Structure on Labor Force Participation and Married Japanese Women’s Earnings” The Japanese Economy

* Rebick, M. (2005) “The Japanese Employment System: Adapting to a New Economic Environment” Oxford; New York, Oxford University Press.

*Kanbayashi, R and T. Kato (2011) “Long-term Employment and Job Security in Japan and the U.S. over the Last Twenty-five Years: A Comparative Analysis” IZA Discussion Papers 6183, Institute for the Study of Labor (IZA)

*Ono, H. (2010) “Lifetime Employment in Japan: Concepts and Measurements,” Journal of the Japanese and International Economies.

Kambayashi, R. and T. Kato (2011) “The Japanese Employment System after the Bubble Burst: New Evidence,” in Hamada, K., A. Kashyap, and D. E. Weinstein Japan’s Bubble, Deflation, and Long-term Stagnation MIT Press.

Week 5.A. Income Inequality and Welfare Policy

*DF, Chapter 1

*Moriguchi, C. and E. Saez (2008) “The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics” Review of Economics and Statistics, Volume: 90 Issue 4 Pages: 713-734

Tachibanaki, T. (2006) “Inequality and Poverty in Japan” Japanese Economic Review 57, 1-27

Ohtake, F. (2008) "Inequality in Japan," Asian Economic Policy Review, Japan Center for Economic Research, vol. 3(1), pages 87-109.

*Tachibanaki, T. (2005). Confronting income inequality in Japan: A comparative analysis of causes, consequences, and reform. Cambridge, Mass: MIT Press.

Garon, S. (2002) “Japanese Policies toward Poverty and Public Assistance: A Historical Perspective”. World Bank Institute Working Papers no. 37200 http://siteresources.worldbank.org/WBI/Resources/wbi37200.pdf

Week 5.B. Demographic Change, Social Security System, and Saving

DF, Chapter 5 and Chapter10 (Social Security pp. 223-225)

*DI, Chapter 4 and 5

Mitchell, O. S. (2002) “Managing Pensions in the 21st Century: Design Innovations, Market Impact, and Regulatory Issues for Japan.” In Social Security Reform in Advanced Countries, eds. Toshihiro Ihori and Toshiaki Tachibanaki Routledge: London. 2002:

9-38

Horioka, C. Y. (2010) "The (dis)saving behavior of the aged in Japan," Japan and the World Economy, Elsevier, vol. 22(3) pages 151-158, August.

Ichimura, H. and S. Shimizutani (2012) “Retirement Process in Japan: New Evidence from the Japanese Study on Aging and Retirement (JSTAR)” In: National Research Council (US) Panel on Policy Research and Data Needs to Meet the Challenge of Aging in Asia; Smith JP, Majmundar M, editors. Aging in Asia: Findings from New and Emerging Data Initiatives. Washington (DC): National Academies Press (US); Available from: http://www.ncbi.nlm.nih.gov/books/NBK109234/

*Chen, K., A. Imrohoroglu, and S. Imrohoroglu (2006) “The Japanese Saving Rate,” American Economic Review 96(5), 2006, 1850-1858.

*Braun, R. A., D. Ikeda and D. Joines (2009) “The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low” International Economic Review, Vol. 50, Issue 1, pp. 291-321,

* Sekiya, S. (2011) “Financial Literacy and Retirement Planning in Japan” Journal of Pension Economics and Finance vol. 10 issue 4 October 2011

Week 6.A. Health Care System

DF, Chapter10 (Government Health Insurance pp.225-226)

Kondo, A. and H. Shigeoka (2011) "Effects of Universal Health Insurance on Health Care Utilization and Health Outcomes: Evidence from Japan", mimeo http://www.columbia.edu/~hs2166/Kondo_Shigeoka_Oct4_2011.pdf

Hashimoto H., N. Ikegami, K. Shibuya, N. Izumida, H. Noguchi, H. Yasunaga, H. Miyata, JM Acuin, and M.R. Reich (2011) “Cost containment and quality of care in Japan: is there a trade-off?” Lancet, 378:1174–1182

Shibuya K., H. Hashimoto, N. Ikegami, A. Nishi, T. Tanimoto, H. Miyata, K. Takemi, M.R. Reich (2011) “Future of Japan's system of good health at low cost with equity: Beyond universal coverage” Lancet, 378: 1265-1273.

*Reich M.R., N. Ikegami, K. Shibuya, and K.Takemi (2011) “50 years of pursuing a healthy society in Japan” Lancet, 378(9796):1051-3

*Sawada, Y, J. Chen, and Y. Choi (2009) “How Is Suicide Different in Japan? Japan and the World Economy, 21(2), February 2009, 140-150

Week 6.B. Data Analysis Exercise

Week 7.A. Energy Policy and Global Climate Change

Ito, K. (2012) “Reforming Japan's Power Industry”, mimeo

Jupesta, J. and A. Suwa (forthcoming) “Sustainable Energy Policy in Japan, Post Fukushima,” International Association for Energy Economics

Weinstein, D. E. and M. Schnell (2012) “Evaluating the Economic Response to Japan's Earthquake” RIETI Policy Discussion Paper Series, February 2012. http://www.rieti.go.jp/jp/publications/pdp/12p003.pdf

*Paltsev, S., J. M. Reilly, H. D. Jacoby, and K. H. Tay (2004) “The Cost of Kyoto Protocol Targets: The Case of Japan”. MIT Joint Program for the Science and Policy

*DF, Chapter 11

IV. Institution and Economy

Week 7.B. Tax System and Its Reform

DI, Chapter 6 (pp133-145)

*DI, Chapter 9 and 10

*Doi, T., T. Hoshi, and T. Okimoto (2011) "Japanese Government Debt and Sustainability of Fiscal Policy", Journal of the Japanese and International Economies, vol.25, no.4

*Nagaosa , M. (2003) “Challenging Tax Reform in Japan”. Tax Policy Conference, p. 161, 2003. Available at SSRN: http://ssrn.com/abstract=2073379

Botman, D., H. Edison, and P. N'Diaye (2007) “Strategies for Fiscal Consolidation in Japan-Selected Issues,” IMF Country Report No. 06/276 and IMF Working

*Bessho, S. and M. Hayashi. (2005) “Economic Studies of Taxation in Japan: The case of personal income taxes” Journal of Asian Economics 16(6) 956-972.

Week 8&9. Japanese Management System I and II: Employment System, Corporate Governance, and Financial System

DF, Chapter 12 (Japan’s Business Groups, pp238-pp247 and Long-term Trading Ties, pp251-252) and Chapter 10 (Main Bank System, pp282-pp287)

*Roehl, T. (2011) “Japanese Business Institutions : An Illustration of the Douglas North Institutional Economics", Hikone Ronso

Aoki, M. (1990) "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, pp. 1-27.

McGuire, J. and S. Dow (2009) “Japanese Keiretsu: Past, Present and Future” Asia Pacific Journal of Management, vol. 26, issue 2, pages 333-351

*Miwa, Y. and J. Ramseyer (2004) "The Fable of the Keiretsu, and Other Tales of Japan We Wish Were True" Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series. Paper 471. http://lsr.nellco.org/harvard_olin/471

Allen, F. and M. Zhao (2007) "The Corporate Governance Model of Japan: Shareholders are not Rulers." Beijing University Business Review.

*Vogel, S. (2006) Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism. Ithaca, NY: Cornell University Press

Ono, H. (2010) “Lifetime Employment in Japan: Concepts and Measurements,” Journal of the Japanese and International Economies.

V. Japan and the Global Economy

Week 10. Japan in the Global Economy I (International Trade)

DF, Chapter 8

*Bernhofen, D. M., and J. C. Brown (2005) "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan." American Economic Review, 95(1): 208–225.

*Harrigan, J. and R. Vanjani (2003) "Is Japan's Trade (Still) Different?" Journal of the Japanese and International Economies, v17 (4,Dec) 507-519.

Waldenberger, F. (2008) “Has the Japanese economy become more open?” Japan aktuell, 16 2, S.3-21

*Mulgan, A.G. (2008) “Japan's FTA Politics and the Problem of Agricultural Trade Liberalisation” Australian Journal of International Affairs 62, 2: 164-78.

*Ando, M. and F. Kimura (2012) How did the Japanese Exports Respond to Two Crises in the International Production Networks? The Global Financial Crisis and the Great East Japan Earthquake (pages 261–287) Volume 26, Issue 3, pages 261–287

Wakasugi, R., Y. Todo, H. Sato, S. Nishioka, T. Matsuura, B. Ito, A. Tanaka (2008) “The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data,” RIETI Discussion Paper Series 08-E -036

Baldwin, R. & Okubo, T. 2012. Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates. National Bureau of Economic Research Working Paper Series, No. 18083

Week 11.A. Japan in the Global Economy II (International Finance)

DF, Chapter 7

Ito, T., S. Koibuchi and K. Sato and J. Shimizu (2010) "Why isn't the use of yen more widespread? A puzzle of invoicing currency choice in Japanese exporters" http://www.voxeu.org/article/why-don-t-japanese-exporters-use-yen (Full-article: *Ito, T., S. Koibuchi and K. Sato and J. Shimizu (2010) "Why has the yen failed to become a dominant invoicing currency in Asia? A firm-level analysis of Japanese Exporters' invoicing behavior," NBER Working Papers 16231, National Bureau of Economic Research, Inc.)

Dennis, B., C. Laincz and L. Zhu (2008) "Which Exchange Rates Matter for FDI? Evidence for Japan," Southern Economic Journal, Southern Economic Association, vol. 75(1) pages 50-68

Henning, C.R. (2009) “The Future of the Chiang Mai Initiative: An Asian Monetary Fund?” Peterson Institute for International Economics, Policy Brief, no. 09-5

Week 11.B. Economic Geography of Japan

Yamamura, E. and I. Shin (2007) “Dynamics of agglomeration economies and regional industrial structure: The case of the assembly industry of the Greater Tokyo Region, 1960–2000” Structural Change and Economic Dynamics, 18-4 483-499.

Fujita, M., T. Mori, J.Henderson, and Y. Kanemoto (2004) Chapter 65 Spatial distribution of economic activities in Japan and China. In: HENDERSON, J. V. & JACQUES-FRAN OIS, T. (eds.) Handbook of Regional and Urban Economics. Elsevier.

*Mano, Y. & K. Otsuka (2000) "Agglomeration Economies and Geographical Concentration of Industries: A Case Study of Manufacturing Sectors in Postwar Japan," Journal of the Japanese and International Economies, Elsevier, vol. 14(3), pages 189-203, September

Week 12. Wrap Up

Hoshi, T. and A. Kashyap (2012) “Policy Options for Japan's Revival”, National Institute for. Research Advancement (NIRA) Report