Competition in the Pay-TV Market

This paper discusses competition in the emerging pay-TV market. Economic features of the industry are described, and the current state of the market in the UK is summarized. Two simple formal models of the industry are analyzed: First the danger of two vertically integrated pay-TV networks entering into collusive agreements to exchange programming with each other is discussed; second, the private and social incentives for signing exclusive contracts for premium programming are analyzed. J. Japan. Int. Econ., December 1999, 13(4), pp. 257–280. Nuffield College, Oxford OX1 1NF, United Kingdom. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: D43, L13, L41, L82.     

The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market

This paper analyzes the competitive impact of the recent import liberalization of the Japanese oil product market. In response to the import liberalization in March 1996, not only did the market price of gasoline decline sharply but also its domestic production kept rising and did not decline relative to imports. Moreover, its price fell substantially before the actual liberalization of the import. This paper demonstrates both theoretically and empirically that the theory of implicit cartel can explain such features of the impact of import liberalization very well. The paper also identifies the significantly positive welfare impact of such liberalization due to the expansion of supply in a market with a large tax wedge between price and cost and, possibly more importantly, due to the transformation of competitive conduct from unproductive investment for cartel-rent shifting into price cuts. J. Japan. Int. Econ., December 1999, 13(4), pp. 397–423. Hitotsubashi University; and Keio University. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L40, F12, K21.     

Sectoral Price Movements under the Yen Appreciation

This paper analyzes the movements of tradable goods prices in Japan. The import price indices and the export price indices are matched with the domestic wholesale price indices at the most detailed level available for Japan, and the pricing behavior in the yen appreciation period (1985–1995) is examined. In the import-side analysis, we investigate how far the price movements under currency appreciation deviate from the law of one price. We find that internal–external price differentials have surprisingly expanded for most of the products since 1985. For a number of commodities, the import prices do not decline as far as the exchange rate appreciates, and the domestic wholesale prices do not decrease as far as the import prices decline. Although the expanded price gaps cannot necessarily be interpreted as a result of deliberate trade barriers, they suggest that some sort of handicap is imposed on imported goods and the large fraction of rent generated by the yen appreciation is intercepted in the middle. In the export-side analysis, the relationship between the globalization of firms' activities and export pass-through is investigated. Our cross-sectional regression analysis indicates that the export path-through rates tend to be low when the value added ratios of foreign production of Japanese firms are high. Low export pass-through under currency appreciation is often interpreted as a result of firms' attempts to keep their foreign market share, but the globalization of firms' activities may be another important factor in lowering the pass-through.J. Japan Int. Econ.,December 1997,11(4), pp. 611–641. Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108, Japan.     

Determinants of Individual-Firm Markup in Japan: Market Concentration, Market Share, and FTC Regulations

This paper estimates individual firm level markup for more than 400 major manufacturing firms in Japan. Our estimates suggest the presence of significant market power for most of these firms, due not only to market concentration but also to the firms' own market shares, as well as advertizing and sales promotion efforts. The paper then goes on to assess systematically the impact on estimated markups of regulatory measures taken by the Fair Trade Commission (FTC) of the Japanese Government. We find that non-punitive FTC activities are directed toward the right targets and are reasonably effective, whereas injunctions, the strongest measure endowed to the FTC, has essentially no effect on the markups of firms in our sample. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 424–450. Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan; Institute for Social and Economic Research, Osaka University; and Faculty of Economics, University of Tokyo. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L13, L41.     

Fluctuations in Unemployment and Industry Labor Markets

Throughout the 1990s, and particularly in the mid- to late-1990s, the Japanese employment situation went from bad to worse. We investigate the causes of rising unemployment in Japan, using data on individual workers from the “Special Survey of the Labor Force” between 1988 and 1999. This research focuses on the effect of labor market segmentation by industry on labor flows. Our findings reveal that unemployment in the construction industry and, more recently, in the service industry has contributed greatly to the national unemployment rate. We also find that most successful job transfers occur within the same industry, even though workers may experience some periods of unemployment. Finally, our results show that labor market conditions in each industry affect the probability that a worker will fall into unemployment as well as the probability that an unemployed worker will find new employment. These findings suggest that the Japanese labor market is segmented by industry and this segmentation contributed to the worsening unemployment in Japan. J. Japan. Int. Econ., December 2001, 15(4), pp. 437–464. Department of Economics, Dokkyo University, 1-1 Gakuen-cho, Soka-shi, Saitama 340-0042, Japan; Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, 464-8601, Japan. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J63, J64.     

Can IT be Japan's savior?

This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s [Hayashi, F., Prescott, E.C., 2002. The 1990s in Japan: A lost decade. Rev. Econ. Dynam. 5, 206–235], our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital–output ratio. We also show that, to revive a 2% long-term growth in per capita GDP, Japan needs to direct 10% of private total hours to the IT sector. J. Japanese Int. Economies 19 (4) (2005) 543–567.     

Interindustry effects of productivity growth in Japan: 1960–2000

Combining conventional sectoral growth accounting and the static open input–output price model, we analyze the sources of growth of product prices in Japan during the period 1960–2000. Using the input–output framework, we take into account not only the effects of factor costs and productivity within a sector, but also their impacts outside of the sector. We find that Japan's deflation in the 1990s was characterized by low growth of wage rates, low productivity growth, and a low rate of return on capital. Until 1990, productivity improvements compensated for factor cost pressures on output price, especially the rapid growth of labor cost. In contrast, during the 1990s, decreasing rates of return on capital, not productivity improvements, canceled out the inflationary effect of wage growth. J. Japanese Int. Economies 19 (4) (2005) 568–585.     

The Long-Run Purchasing Power Parity for the Yen: Historical Overview

This paper examines the long-run behavior of the yen/dollar real exchange rate. Several series are spliced to compose long Japanese consumer and wholesale price indices, long U.S. consumer and wholesale price indices, and the yen/dollar exchange rate, from 1879 to 1995. The CPI-based real exchange rate tended to depreciate in the pre-WWII periods, but strongly appreciated in the post-WWII periods. The WPI-based real exchange rate did not show any trend in the pre-WWII periods, but appreciated moderately in the post-WWII periods. The unit root tests were not rejected for the CPI-based real exchange rate series, but some of them were rejected for the WPI-based real exchange rate series, suggesting mean reversion property only for the WPI-based series. The Balassa–Samuelson hypothesis to explain a drift and/or a trend in the real exchange rate series had only a weak support.J. Japan. Int. Econ.,December 1997,11(4), pp. 502–521. Institute of Economic Research, Hitotsubashi University, Naka 2-1, Kunitachi, Tokyo 186, Japan.     

Stock market rationality and price volatility: Tests using Japanese data

This paper tests the stock market rationality hypothesis, which implies that a stock price is determined as the discounted sum of optimally forecasted future dividends. Mankiw-Romer-Shapiro volatility tests and new volatility tests which do not use the unobservable “ex post rational price” are applied to the data from a stock market in Japan. A Hausman type specification test of the market rationality hypothesis is also developed and applied to the data. The results suggest that we cannot reject the hypothesis that the Japanese stock market is rational. A couple of variance inequalities are violated by the data but the violation does not seem to be significant. J. Japan. Int. Econ., December 1987, 1(4), pp. 441–462. Massachusetts Institute of Technology, Cambridge, MA 02139.     

Deregulation, Integration, and Market Structure in European Banking

This paper analyzes the impact of deregulation and market integration policies on the structure of European banking markets. It argues that whether European integration will lead to large increases in EU-wide concentration will depend on the extent to which competition in banking is based on endogenous sunk costs or, alternatively, on variable costs and exogenous sunk costs. The paper also highlights the role of own funds as a source of endogenous increasing returns. Finally, it proposes an empirical test of the dominant form of competition. This procedure is applied to data for 11 EU countries during the period 1981–1995. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 372–396. IESE (International Graduate School of Management), University of Navarra, Av. Pearson 21, 08034 Barcelona, Spain. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: G20, G21.     

Information technology and the Japanese economy

In this paper we compare sources of economic growth in Japan and the United States from 1975 through 2003, focusing on the role of information technology (IT). We have adjusted Japanese data to conform to US definitions in order to provide a rigorous comparison between the two economies. The adjusted data show that the share of the Japanese gross domestic product devoted to investment in computers, telecommunications equipment, and software rose sharply after 1995. The contribution of total factor productivity growth from the IT sector in Japan also increased, while the contributions of labor input and productivity growth from the non-IT sector lagged far behind the United States. Our projection of potential economic growth in Japan from for the next decade is substantially below that in the United States, mainly due to slower growth of labor input. Our projections of labor productivity growth in the two economies are much more similar. J. Japanese Int. Economies 19 (4) (2005) 460–481.     

Local and Global Competition in Information Technology

We examine the implications of changing competitive dynamics in global information and communications technology (ICT) markets for government demand-steering policies whose goal is local rents. Both computing and telephony are undergoing changes in global industry structure and changes in the nature of competition. The convergence of computing and telephony and the rapid technological change (and accompanying technological uncertainty) driving this convergence reinforce trends toward vertical competition. The emergence of global ICT markets lowers entry barriers, likely encouraging government-supported local entrants into global ICT markets. There are, however, strongly offsetting disadvantages. The underlying economics of ICT markets under vertical competition will work to reinforce the dominant position of U.S.-based incumbents in many segments. The prospects for exports, command of rent-related standards, and large rents from exports are not very bright. We expect to see far more demand-steering attempts than successes. J. Japan. Int. Econ., December 1999, 13(4), pp. 336–371. Landau Economics Building, Department of Economics-6072, Stanford, California 94305-6072; and International Computer Services Research, Stanford Computer Industry Project, Landau Economics Building, SIEPR 144, Stanford, California 94305-6016. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L5, F110.     

The Pricing of Critical Applications in the Internet

A number of authors have recently proposed techniques for pricing access to Internet resources in the case of congestion. However, these approaches do not take into account the fact that some applications necessitate guaranteed capacity over a relatively long period of time. This paper discusses some elements of the theory of a mechanism that would accommodate such applications. We begin by reviewing both current practice and theory. We then build infinite horizon stationary models with asymmetry of information, which we first use to show the limits of smart markets (McKie-Mason and Varian). Finally, in a very simplified model, we compute the optimal mechanism, and in a specific example, we show that the optimal mechanism favors the high-type long-term user. J. Japan. Int. Econ., December 1999, 13(4), pp. 281–310. CNRS, IDEI, and GREMAQ, University of Toulouse 1, Toulouse F-31042, France; and University of Toulouse 1, Toulouse F-31042, France. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: C73, D44, D82, L96.     

Efficient Monetary Policy Design near Price Stability

Using dynamic programming methods, we study the design of optimal monetary policy in a simple, calibrated open-economy model and evaluate the effect of the liquidity trap generated by the zero bound on nominal interest rates. We show that the optimal policy near price stability is asymmetric. As inflation declines, policy turns expansionary sooner and more aggressively than would be optimal in the absence of the zero bound. This introduces an upward bias in the average level of inflation. We also discuss operational issues associated with the interpretation and implementation of policy at the zero bound in relation to the recent situation in Japan. J. Japan. Int. Econ., December 2000, 14(4), pp. 327–365. Board of Governors of the Federal Reserve System, Washington, D.C. 20551 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E52, E58, E61.     

Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher''s Commodity Points Revisited

We propose that analysis of purchasing power parity (PPP) and the law of one price should explicitly take into account the possibility of “commodity points”—thresholds delineating a region of no central tendency among relative prices, possibly due to lack of perfect arbitrage in the presence of transaction costs and uncertainty. More than 80 years ago, Heckscher stressed the importance of such incomplete arbitrage in the empirical application of PPP. We devise an econometric method to identify commodity points. Price adjustment is treated as a nonlinear process, and a threshold autoregression offers a parsimonious specification within which both thresholds and adjustment speeds are estimated by maximum likelihood methods. Our model performs well using post-1980 data, and yields parameter estimates that appear quite reasonable: adjustment outside the thresholds might imply half-lives of price deviations measured in months rather than years, and the thresholds correspond to popular rough estimates as to the order of magnitude of actual transport costs. The estimated commodity points appear to be positively related to objective measures of market segmentation, notably nominal exchange rate volatility.J. Japan Int. Econ.December 1997,11(4), pp. 441–479. Department of Economics, University of California, Berkeley, California 94720-3880; and Department of Economics, Northwestern University, Evanston, Illinois 60208-2600.     

How much have been the export products changed from homogeneous to differentiated? Evidence from China, Japan, and Korea

Many international trade theories and evidence suggest that trade in homogeneous and differentiated goods is different, and trade performance depends significantly on the extent of product differentiation. First this paper classifies the three countries' export products using Rauch's [Rauch, J. (1999). Networks versus markets in international trade. Journal of International Economics, 48, 7–35] classification scheme. This paper suggests a sophisticated technique to obtain the extent of product differentiation in a country's export, implied by Dixit and Stiglitz [Dixit, A., & Stiglitz, J. (1977). Monopolistic competition and optimum product variety. The American Economic Review, 67, 297–308] model in which the smaller is the elasticity of substitution between varieties the greater is the extent of product differentiation. This is an attempt to identify the extent of product differentiation in each country's export basket by estimates of the elasticity of substitution. The estimated elasticities of substitution vary across countries. The most interesting empirical finding is that the China's export structure has been rapidly shaped into differentiated products. However the extent of product differentiation in Japan and Korea's exports has relatively less varied.     

Thinking About the Liquidity Trap

The phenomenon of the liquidity trap—defined as a situation in which even a zero interest rate is insufficiently low to produce full employment—has taken on new importance with the persistent slump in Japan. This paper restates recent theoretical work on liquidity traps, drawing a link between “intertemporal” models that are mainly concerned with demonstrating the underlying logic, and more ad hoc models that bear directly on policy; it then reexamines policy alternatives, including fiscal stimulus and inflation targeting. J. Japan. Int. Econ., December 2000, 14(4), pp. 221–237. Woodrow Wilson School, Princeton University, Princeton, New Jersey 08544-1013 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E58, E31, F31.     

The Role of Monetary Policy in Japan: A Break in the 1990s?

This article documents time series evidence suggesting the case for a possible structural break in the role of Japan's monetary policy during the 1990s. It uses a simple vector autoregressive framework and offers some suggestive results: While a persistent effect of monetary policy on real output is detected over the full sample of 1975–1998 and the subsample that ends in 1993, such effect disappears with the recent subsample of the 1990s. The stability analysis also provides more specified evidence that there is a break in the reduced form dynamic system in 1995. Some interpretations are offered to intuitively support these findings. J. Japan. Int. Econ., December 2000, 14(4), pp. 366–384. Research Institute for Economics and Business Administration, Kobe University, Rokko, Nada, Kobe 657-8501, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E32.     

Telecommunications reform in Indonesia: Achievements and challenges

Telecommunications reform in Indonesia has occurred in two phases. In the first, from 1989, private participation was permitted in the fixed-line sector through public–private partnership (PPP) arrangements. In the current reform phase, which began in 1999, a duopoly structure was created in fixed-line sector operations, accompanied by a pro-competitive regulatory regime. The first reform phase was not successful. This paper explains that contract-based PPP programs provided only short-term solutions to the problem of lack of capacity. The more wide-ranging 1999 reforms acknowledge the importance of competition and a sound regulatory regime in telecommunications reform, but there are still limits on market entry, and the problems of lack of interconnection and network development disparities remain.     

Fiscal Reconstruction and Local Interest Groups in Japan

This paper investigates the politicoeconomic properties of the fiscal reconstruction process in Japan by analyzing the dynamic game among local interest groups with concessions of region-specific privileges. Free-riding behavior of local interest groups brings numerous deficits. Our empirical evidence indicates that local privileges were powerful in the 1990s, which is the main reason fiscal reconstruction did not perform very well in the 1990s. J. Japan. Int. Econ., December 2002, 16(4), pp. 492–511. Faculty of Economics, Keio University, and Graduate School of International Relations and Pacific Studies, University of California, San Diego; and Department of Economics, University of Tokyo, Hongo, Tokyo 113-0033, Japan, and Economic and Social Research Institute, Cabinet Office of Japan, 3-1-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8970, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: H41, F13, D62.