Paradox of the Japanese Economy: Institutional Roots of Prosperity and Stagnation

Author: Gao Bo
Publisher:
Publish Date: 2004-12-01
Features: The analysis of Japan in this book holds multifaceted significance for China, encompassing both the similarities and differences in the economic systems of the two countries in addressing the two inherent contradictions revealed in the book regarding economic systems and corporate governance. Briefly, corporate governance in China resembles that of Japan, both being strong in coordination but weak in monitoring, despite significant differences in the institutional arrangements that shape these characteristics. However, China's approach to handling the contradiction between political stability and industrial restructuring differs entirely from that of Japan. This book reveals to China the lessons Japan learned from its experience in dealing with its relationship with the international financial order. Since World War II, Japan has failed to effectively address the challenges it faced during two crises of the international financial order. The first was in the late 1960s. At that time, the United States' trade deficit had surged, and the dollar had to depreciate to resolve the trade imbalance. Japan firmly refused to allow the yen to appreciate. As a result, the Bretton Woods system collapsed. Although Japanese economists unanimously agree that the fixed exchange rate under the Bretton Woods system was a crucial factor in post-war Japanese economic development, Japan was unwilling to make any effort to maintain the survival of the system. The second was in the mid-1980s. This time, Japan responded actively yet unpreparedly to the demands of the United States, which ultimately led to the bubble in the Japanese economy and its subsequent long-term stagnation.