Japanese Economy term paper

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“On the other hand, emergency economic policies in the form of additional public expenditures favouring construction companies among others, and rescue operations for banks and other financial institutions were repeatedly undertaken, thus deepening the fiscal crisis of the state. The difficulties faced by many Japanese financial institutions which hold huge amounts of bad loans were also mitigated by lowering the official rate of interest to extremely low levels. The long term rate of interest has been below 2 per cent in the 1990s (the official rate of interest having been at 0.5 per cent since 1995), thus mitigating the costs of debt for both financial institutions and the state. At the same, it has worsened conditions for the elderly who rely on interest received on the savings. Due to various special reductions in corporation taxes, several big companies have continued to invest abroad without paying domestic corporation tax. Unfairness in the tax system — especially in obtaining exact information of actual taxable incomes among social classes out of wage earners — was not addressed. In the face of a deepening fiscal crisis for the state, the corporate tax rate, inheritance tax rates and the marginal rate of income tax were alleviated for wealthier persons on the pretext of revitalizing the market economy in line with neoliberalism. In the contemporary capitalist society, three major economic subjects constitute and support the national economy: namely, capitalist firms, households of working people, and the state. Balance among them is necessary in order to maintain a sound and healthy economic system. In the course of Japanese economic restructuring, the revitalization of capitalist firms had one-sided costs. Neoliberalism was employed to restrengthen the company-centred socioeconomic order. Resolving the fiscal crisis of the state tends to impose greater burdens onto the shoulders of weaker people, with repeated injections of public money to alleviate the difficulties of big businesses and banks. The state does not mitigate but helps the capitalistic law that the stronger prey upon the weaker.”
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Corporations' drift away from banks is likely to have the effect of reducing creditors' influence on corporate managers, or of decreasing the number of firms in which creditors can have a say. This will mean increased autonomy of corporate management, but it will also mean that banks will find it increasingly difficult to perform their 'family doctor' role in keeping a close watch on the performance of their debtor firms, and also their role as lawyers in service of their client firms. One factor worthy of attention in this connection is that banks are trying to reduce their assets as a means of satisfying the Bank of International Settlements' 8 per cent requirement on the net-worth ratio, and trying to do so by way of converting their credits into securities. This potentially threatens to destroy the long-lasting direct transaction relationships they have had with their client firms with regard to supplies of funds to the latter. At present, firms borrowing from banks are stubbornly refusing to have their debts converted into securities. Should the conversion of credits into securities take place on a large scale, banks' roles as main banks to their borrower firms will be modified significantly. However, the most crucial question affecting the modification of companyism in Japan is whether the principle of providing white-collar employees of the same age group with equal opportunities for competition, and treating them with as little discrimination as possible for an extended period, is likely to be modified or not.”
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“Perhaps the best known middle level of strategic-economic coordination in Japan is the neo-zaibatsu. There are six of these, consisting of about 30 corporations each. Their main function is to coordinate activities that require cooperation among corporations of different types, as we have seen. Almost everything MITI does, it does in part through neo-zaibatsu corporations. Each neo-zaibatsu has sufficiently varied assets that it can, if need be, meet MITI goals without drawing on resources from outside its own group. Each neo-zaibatsu is a kind of strategic economy in miniature, a complete microcosm. Each neo-zaibatsu bank and presidents' club must do what MITI does, namely supervise complex corporate interactions to produce rapid growth. Neozaibatsu banks and presidents' clubs practice what might be called non-coercive supervision. A neo-zaibatsu bank exercises major de facto influence over neozaibatsu member corporations, but as with MITI, this is in the nature of instruction and coordination, not specific command. Also as with MITI, the degree of influence is nonetheless great because the group bank governs the member corporation's credit, which is its only major source of external funding.”
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