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. It includes both the similarities and differences between the economic systems of the two countries in handling the two inherent contradictions revealed in the book's exploration of economic systems and corporate governance. In short, 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 this characteristic. However, China's approach to addressing the contradiction between political stability and industrial restructuring differs entirely from that of Japan. The book reveals to China the lessons Japan learned from its experience in handling 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 be devalued 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 system's survival. The second was in the mid-1980s. This time, Japan responded actively yet unpreparedly to the demands of the United States, leading to a bubble in the Japanese economy and prolonged stagnation after its burst.