Current Account and Fiscal Policy in Japan: 1885–1991

This paper explores the empirical relationship between the current account balance and macroeconomic series for the Japanese economy over the years 1885–1991. The long-run equilibrium depends on which series (public debt or budget deficits) affects assets relative to a capital stock rate. Departing from the Ricardian Equivalence structure (no bequest motives), fiscal policy in Japan is shown to be more related to the current account when policy is introduced by shifts in tax revenues rather than by changes in national debt.     

Top wage incomes in Japan, 1951–2005

Using wage income tax statistics, we construct continuous series of upper wage income shares in Japan from 1951 to 2005 to document the evolution of top wage incomes and investigate their long-run determinants. We find that, while the middle wage income class gained enormously both in absolute and relative terms during the period of high economic growth, the upper wage income class faired comparatively better after 1975. In particular, the shares of total wage accruing to the top 1% wage earners and above have risen steadily since the late 1990s. A simple time-series regression analysis indicates that marginal income tax rates, corporate performance, female labor force participation, and labor disputes are important determinants of top wage income shares in post-WWII Japan. Although not conclusive, our results suggest that much of the recent gains in wage income shares at the top can be explained by the changes in these four factors, placing a less emphasis on a story of structural change.     

Broker Compensation Patterns and Trends: 2005–2009

Changes in the mortgage industry have been swiftly effected over the past few years. Many of the changes have come about as a response to the high level of observed delinquencies and defaults on residential mortgages as house prices plummeted, and others have evolved from continuing concerns about the treatment of borrowers during the mortgage origination process. The segmented mortgage industry of the early part of the decade, with loans being originated in the prime, subprime and government mortgage sectors, has been largely replaced with a bifurcated system. By year end 2010, the FHA/VA (government sector) combined with the conventional, conforming market share of originations was 90.8?%. In this paper, we examine some of the observed trends and changes in the types and levels of broker compensation that existed before the regulatory change that brought about the implementation of the Federal Reserve Board??s (FRB) new loan officer compensation rule. Among other questions, we examine the variance in broker compensation across geographies, across lenders, across borrower types, and across loan products. The intent of this ex post analysis is to provide an understanding of the potential impacts of the declining broker industry on both access to mortgage loans and on the pricing of mortgage originations.     

Asset price fluctuations in Japan: 1980–2000

In this paper, we try to account for the recent fluctuations in asset prices in Japan using a dynamic stochastic general equilibrium model. In our model, a key to explain the land-price fluctuation is how people's expectations about future productivity growth evolve over time. Specifically, by assuming adaptive learning on the growth rate of productivity, our model can replicate the Japanese land-price fluctuations over the period 1980–2000. However, even with adaptive learning, habit persistence, and costly capital accumulation, a substantial portion of the stock-price fluctuation is left unexplained, and a puzzle remains.     

Agricultural development in industrialising Japan, 1880–1940

This study reviews research examining agricultural development in industrialising Japan. We focus on the (dys)functioning of markets for land, finance, labour and agricultural commodities. We cover topics including land (mis)allocation, size-productivity relationships, tenancy contract choice and Marshallian inefficiency, property rights, microfinance, shock-coping strategies, rural–urban migration and agricultural market integration. The literature reveals that market failures often observed in developing economies were not prominent, except for possibly labour markets. The literature also highlights the roles and administrative capacities of central and local governments. Tight local communities served to reduce transaction costs.     

Regional Divergence of per capita GDP in China: 1991–99

Using China's regional data from 1991 to 1999, this paper investigates inter-regional income inequalities. GMM estimation has been used to explore a dynamic panel data model based on the Solow growth model. We find that regions conditionally converge to their own steady states at an annual rate of 8%, indicating around 8 years for a region to halve the deviation from its balanced growth path. However, the panel data exploration of convergence could not explain the catching up phenomenon. To see whether poorer regions can grow faster than richer ones, sigma and absolute beta divergence have been employed. We find that when the regional income gap enlarges during the 1990s, the initially poor regions do not catch up with the initially rich regions.     

Regional patterns of employment changes of less-educated men in Japan: 1990–2007

We investigate regional patterns in employment of less-educated men in Japan from 1990 to 2007. The employment–population ratio of junior high school graduate men (9 years of compulsory schooling) decreased from 1990 to 2007. Wage growth across regions had a unique pattern during this period: it was high in the low-wage regions in the 1990s but high in the high-wage regions in the 2000s. We use these regional variations in wage growth to identify the labor supply elasticity of less-educated men. The estimated elasticity of the employment-to-population ratio of junior high school graduate men is around 0.15.     

The identification of liquidity effects in the EMS: Italy 1991–1992

We study the impact of liquidity shocks in Italy in the 1991–1992 period, when the lira belonged to the narrow ERM band with no exchange controls. We conduct our analysis by constructing (not simply assuming) predetermined measures of liquidity supply shocks, taking into account the institutional features of the money market and the reserve requirements' average computation system. We find that the supply of liquidity did significantly affect short-term interest rates; however, in contrast to earlier periods, most of the interest rate variations were attributable to foreign-exchange-related factors, as predicted by the asymmetric view of the ERM.     

Trends in Job Quality for African-American Workers, 1979–2011

Economists expect that increases in education and work experience will increase workers’ productivity and translate into higher compensation. We use data from the March Current Population Survey (CPS) to show that over the past four decades, the “human capital” of the employed black workforce has increased enormously, yet the share of black workers in a “good job” --one that pays at least $19 per hour (in inflation-adjusted 2011 dollars), has employer-provided health insurance, and an employer-sponsored retirement plan-- has actually declined. The CPS data show that black women saw a modest increase in access to “good jobs,” but the share of black men in good jobs decreased. Despite improvements for black women, they were consistently less likely to be in a good job than black men in every year in our sample. Black workers at every age and education level were also less likely to be in a good job in 2011 than they were in 1979.     

Tariff Pass-through in Wholesaling: Evidence from Firm-level Data in Japan✰

Tariff pass-through is critical for considering the benefits of trade liberalization, the beneficiaries, and the extent. This study empirically examines the tariff pass-through in wholesaling through the wholesale firm-level data in Japan. In particular, the study focuses on wholesalers’ margin ratio, that is, (sales – procurements) / sales. We address the endogeneity concerns on the measurement errors of the study variables of margin ratio and tariffs. Consequently, the study found that importing wholesalers significantly raised their margin ratio against tariff reduction. On average, a 1 percentage point reduction of tariffs raised the margin ratio by approximately 0.25 percentage point. This rise is equivalent to that of sales prices to procurement prices by about 0.34 %, indicating that Japanese wholesalers capture one-third of the tariff rent. However, the study also found that a tariff reduction lowers the margin ratio of wholesalers who procure their products from domestic producers.     

The other trade war: Quantifying the Korea–Japan trade dispute

In mid-2019 a new trade war between Korea and Japan started heating up, while the U.S.–China trade war held the spotlight. This paper documents the recent Korea–Japan trade dispute and quantifies its economic impacts. We consider a set of non-tariff distortions—Japanese export controls combined with Korean boycotts of Japanese goods. We simulate the impact of these actions using a multi-region general equilibrium model calibrated to the GTAP version 10 accounts and observed trade responses in the Korea Customs Service data. We find a welfare loss of 0.144% ($1.0 billion) for Korea and 0.013% ($346 million) for Japan. Sectoral impacts include a 0.25% reduction in chemical production in Japan. In Korea the reduction in imports from Japan is offset by increases in domestic production and imports from other countries.     

Productivity analysis of IT capital stock: The USA–Japan comparison

The purpose of this paper is twofold: The first is to examine the information technology (IT) capital investments (including software) and capital stock of the USA and Japan, not merely in the 1990s but from the long-run historical viewpoint and compare the process of IT Revolution of the two countries, using the data from 1974 to 1998. The second is to check how those investments are justifiable, by calculating the marginal benefits and costs of IT related investments in the USA and Japan. We find that while the USA shows a tendency to overinvest in IT capital relative to non-IT capital throughout the observation period, the opposite is the case in Japan.     

China–Japan–United States integration amid global rebalancing: A computable general equilibrium analysis

Using a global general equilibrium trade model, this paper assesses the long-term implications of global rebalancing for Asian economies and explores the benefits of China–Japan–United States (US) integration. The analysis suggests that consumption evaporation, a growth slowdown in the US, and the consequent current account correction would force China, Japan, and other East Asian economies to undergo substantial structural adjustments. A combination of domestic reform aimed at boosting service sector productivity and external liberalization aimed at fostering broader economic integration will be critical for East Asian economies to facilitate their economic rebalancing and sustained growth. Our global computable general equilibrium (CGE) analysis suggests that China and Japan need to strengthen their economic ties with the US while at the same time bringing other East Asian economies into this integration process.     

Measuring China's monetary sterilization and autonomy in the era of globalization: 1995–2005

This paper provides a cointegration analysis of incomplete monetary sterilization and autonomy in China when both financial controls and the exchange rate peg exist. According to an estimated long-run equilibrium relation, only 35 cents are sterilized for a yuan of foreign-exchange reserve that flows into China. In response to the movement in foreign-exchange reserves, M2 proves more endogenous than M1; and in the M2 elasticity model, as the forecast horizon extends, the domestic-credit component of the monetary base exhibits its significant endogeneity with respect to the foreign-asset component, whereas the endogeneity of the foreign-asset component also rises with respect to M2.     

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.     

Stock repurchases in Japan: A solution to excessive corporate saving?

Since the 1990 s profitable Japanese companies have faced lower domestic growth opportunities; they have invested less, yet most have not increased their payout. This has resulted in a substantial deleveraging of their balance sheets. The popular term for this phenomenon is “corporate saving.” Corporate saving by Japanese companies is now at the highest level in history. Dividends and stock repurchases are two potential ways to resolve excessive corporate saving. Stock repurchases in particular offer a fast, flexible and very public method to solve the problem of excessive corporate savings. This research is an investigation of stock repurchases by Japanese companies from 2000 to 2009. Companies repurchase their stock to return excess cash to investors, resolve governance issues, adjust capital structure and send signals. This paper uses accounting and stock market information to explain this behavior. Contrary to recent research on American firms, we find that replacement of dividends does not appear to explain stock repurchase behavior in Japan. We find evidence that repurchase behavior in Japan is linked to excessive corporate savings. However, repurchases are also closely linked to the ownership structure of the firm. Firms whose dominant owners are other members of the firm's industrial group are less likely to repurchase. Bank ownership has mixed implications for repurchases. Firms having foreign and individual ownership are more likely to repurchase stock. Foreign and individual ownership appears to improve governance and thus may be a partial solution to excessive corporate savings.     

Fertility and maternal labor supply in Japan: Conflicting policy goals?

Using panel data on Japanese mothers, this paper estimates the impact of fertility on maternal labor supply using twins as an instrument for the total number of children. We find that having twins actually has a longer term positive impact on maternal labor force participation in Japan. To understand this result, we present evidence that the effects of age and cost of children can generate this finding, are particularly salient in Japan and differ in important ways between twins and non-twin families of the same size. Implications for fertility and labor supply policy in Japan are discussed.     

The liquidity trap: Japan, 1996–2001 versus the United States, 1933–1940

Keynes’ “liquidity trap” rarely occurs. But when it does, it has a tremendously adverse effect on the economy concerned. Such was the case of the United States in the 1930s and now that of contemporary Japan. In a liquidity trap, monetary policy pushes the money interest rate to the zero level while expanding the money supply (M1) at a faster rate than nominal GDP. Conventional theory explains this phenomenon as the result of money demand that becomes infinitely interest-elastic at the zero rate, rendering ineffective the rapidly expanding money supply established by the monetary authorities.In this paper, we show that the liquidity trap is a multifaceted phenomenon not limited to the money market. It involves the bank loan market, the bank deposit market, and the bond market interacting together. Of these, the most important is the bank loan market and the least important is the bank deposit market, whose deposit supply becomes horizontal at the zero rate. They are met by relatively interest-inelastic bank loan demand and bank deposit demand. Hence, the causality is completely reversed from the conventional understanding.We give empirical evidence in support of our theory based on data from the United States, 1933–1940 and Japan, 1996–2001. Far apart in time and space, the two cases are remarkably alike and, hence, provide strong supporting evidence.