Japan�s Strengths and Weaknesses in International Trade and Finance

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has some serious economic challenges.


Economic Overview

In Japan, there is a great deal of government-industry cooperation; a strong work ethic; high technology; and a relatively small defense allocation (1% of GDP) (Bartleby, 2000). These factors have enabled Japan to advance quickly to the rank of second most technologically powerful economy in the world, following the United States, and the third largest economy in the world, following the U.S. and China.

One of the greatest economic characteristics of the Japanese economy is the way that manufacturers, suppliers, and distributors work together in closely knit groups called keiretsu. A second fundamental characteristic has been the guarantee of lifetime employment for the majority of the urban labor force. However, in today's economy, both of these characteristics are dwindling.

Industry, Japan's most important sector (Bartleby, 2000), is extremely dependent on imported raw materials and fuels. The much smaller ...

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of developed European countries. Japan's companies, similar to their German counterparts, have historically used bank financing more than equity and bond issuance, and employees at larger companies are typically loyal to one firm throughout their careers (The Economist, 2002).

According to experts, the Japanese economy is two-tiered, made up of the large multinational companies and small enterprises (The Economist, 2002). According to recent data from the Ministry of Economy, Trade and Industry (METI), in 1999, 99.4 percent of manufacturing concerns were small to medium-sized companies, with 300 or fewer employees. Shipments by these companies accounted for just 52.2% of total ...

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