Changing Japan - Models and Examples - Michael Smitka Washington and Lee University Chiba University Law & Econ Faculty Fulbright Presentation July 9,

Changing Japan- Models and Examples -

Michael SmitkaWashington and Lee University

Chiba University Law & Econ Faculty

Fulbright PresentationJuly 9, 2007

Fulbright Japan Office

© Michael Smitka 2007

© Michael Smitka 2007 2

Fulbright Project

• Book on modern Japanese economy• Two underlying themes

– Demographics and its impact– Lots of change despite slow growth

• Issues– Finding relevant examples

• Ones non-economists might find interesting!

– Finding theories• “Change” is a hard subject!


Theories of change• “Normal” change

– Incremental response to environment

• Policy-induced change– Shifts in regulation (not really “deregulation”!)

• Technology-induced change– For example, 78 & 45 & 331/3

• “Induced” change– Of institutions and “fixed” behavior patterns

• “Revolutions”– Induced change plus a new ideology– Maybe not relevant this time around?


Normal change

• Incremental change in response• Prices• Incomes

– But direction not rate of change

• Lots of comparative examples, accumulated social science knowledge– Food & Booze:

• TODAY: Eggs and Rice, briefly

– Cars– Sex (well, marriage and children)– Schooling


Policies and Changes• Policies change all the time

– Why I will leave to others– Impact of policies often unforeseen

• at least by bureaucrats, politicians and voters

• Examples– Urban development policy and sprawl

• TODAY: post-WWII land reform

– Large store and liquor license laws• TODAY: convenience stores and shopping centers

– Finance: end of “sarakin”

– Trucking: Kuroneko (Yamato Takkyu-bin)


Technological change

• Largely exogenous– But cell phones interact with policy

• cell phone shopping unique to Japan?– I’m too old to be sure!

• Lots of conveniences– Aggregate impact: save time!

• Household tasks• Food preparation

– TODAY: instant ramen, freezers


Induced change

• Institutions have lots of momentum– Interlocking patterns of behavior– Lots of truth in “1945 System” approach

• Need large shock to shift– But can have erosion around the margins

• TODAY: Large firm labor relations


“Lifetime” employment system

• Better labeled:– Internal labor markets with– Mandatory retirement

• Rational response to growth, human capital• Common in the US in various periods / industries• End result a “Ponzi” or pyramid scheme ( ねずみ講 )

– Slow growth eroded the bottom of the pyramid

• Not sustainable!– But how (and when) give way?


LES: incremental change

• Lowering the costs– Flattening of wage profiles– Accelerating attrition

• Early retirement systems– Mado-giwa zoku (“window sitters”)

• Shukko


LES: incremental change

• Shrinking the firm– Employing women

• Who used to quit

– Employing part-time and temporary workers

• Outside the pyramid altogether

– Employing subcontractors


LES: fundamental change

• Job-based pay– Very mixed in practice– In pure form, age independent

• Job markets & mobility– Logical counterpart– No penalty to hiring older workers

• Or encouraging younger to leave

• Long-run implication: external careers– Very partial at present

• But big rise in “professions” and certifications



Will “LES” disappear?

• Always a minority of labor force– In early years, small business 2/3rds of LF!

• Gradual erosion at the margin– 40+ years of decline

• But no “revolution”– No substitute conceptualization– How both workers and employers phrase

• Even if the phrasing doesn’t match the reality!


Sum

• Finding typologies of change is hard• Without typologies, “major” and “minor”

change is in the eye of the beholder• Even without that framework I argue:

– Demographics– The retail revolution (including new goods)– Suburbanization and motorization

• All combine to make Japan rather different!


Consumer Durable Diffusion

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

82 84 86 88 90 92 94 96 982000 2002 2004 2006

Bed

Car

Microwave

Clothes dryer

Air conditioner

Computer

Unit Kitchen


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200020012002200320042005

rice Bread noodles

1986


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002000200120022003200420052006

Rice Bread Noodles



Calories / Nutrition Surveydefinitions changed in 2001

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2004200320022001200019991998199719961995199419931992199119901989198819871986198519841983198219811980197919781977197619751970196519601950

Rice Products Wheat products Grains, all types Potatoes


Passenger Car Ownership, Chiba City

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total Regular Small Kei Commercial (cargo) vehicles

Total up 80%

Small cars -2%

Trucks -22%

Full-sized cars up 16x!!


Announced 2007 store openings floor space large store law registrations2006.01 none -2006.02 none -2006.04 6 stores total 88,395 22006.05 43 stores total 349,706 82006.06 46 stores total 293,098 72006.07 46 stores total 259,691 102006.08 65 stores total 283,641 22006.09 49 stores total 293,001 22006.10 47 stores total 356,863 102006.12 62 stores total 282,651 72007.01 59 stores total 340,085 72007.02 68 new stores 297,825 82007.03 88 new stores 458,101 13

579 3,303,057 76 22over 10,000 over 30,000

Documents

Changing Japan - Models and Examples - Michael Smitka Washington and Lee University Chiba University Law & Econ Faculty Fulbright Presentation July 9,