Time zones,shift working and international outsourcing

We build a trade model with two identical countries located in different time zones and one sector with intermediate differentiated goods produced in two successive stages. We introduce shift working disutility that raises night wage and firms that “virtually” outsource foreign labor. We found that firms only outsource if outsourcing costs are relatively low and shift disutility is high. When outsourcing occurs, it generates the highest level of welfare among production modes. Intermediate values of shift working disutility generate the lowest level of welfare. Outsourcing and domestic labor are substitutes at the firm level and complements at the economy level.     

Profit-Volume-Exchange-Rate Analysis for Planning International Operations

We extend the conventional Profit-Volume (P-V) analysis to develop a new model of Profit-Exchange-Rate (P-ER) analysis to evaluate how exchange rate fluctuations impact profit. We begin by classifying costs as either "global cost" or "local cost" according to whether or not input prices are exchange-rate sensitive. This classification is analogous to the familiar variable/fixed cost classification based on the cost sensitivity to volume change. Data for the U.S. and Japanese steel industries are used to illustrate the approach. We then combine the conventional Profit-Volume analysis with the Profit-Exchange-Rate analysis to form a composite model, called Profit-Volume-Exchange-Rate (P-VER) analysis, where both volume and exchange rate vary. We show that this composite approach suggests the use of a single rate-volume variable, similar to "person-hours," as the key planning-control variable for international operations.     

Aging,Savings, and Public Pensions in Japan*

We analyze the impact of population aging on Japan's household savings rate and on its public pension system and the impact of that system on Japan's household savings rate and obtain the following results: first, the age structure of Japan's population can explain the level of, and past and future trends in, its household savings rate; second, the rapid aging of Japan's population is causing Japan's household savings rate to decline and this decline can be expected to continue; third, the pay‐as‐you‐go nature of the public pension system, combined with rapid population aging, created considerable intergenerational inequities and increased the savings rates of cohorts born after 1965, which in turn slowed the decline in Japan's household savings rate; and fourth, the 2004 public pension reform alleviated the intergenerational inequities of Japan's public pension system somewhat but will in the long run exacerbate the downward trend in Japan's household savings rate.     

市场结合型日中物流管理系统的建立

本文认为,为满足顾客需要,必须从供应链整体出发,重新设计和构建物流管理系统。近年来,随着中国向日本商品供应规模的不断扩大,起支撑作用的物流管理系统也发生了显著变化,日中之间的物流管理系统以消费品为中心实现了从投机原理向推迟原理的转型。以前,中方向日方的供给体制是面向整个市场进行大量生产,但随着日本市场多样化和精细化的发展,这种体制的局限性不断显现。目前按照日方规格进行生产、按照日方市场需求组合物流管理系统的管理模式得到了较大发展。文章提出,反映每个顾客需求的供应模式以及与高效率生产体制互动的供应模式,在供应链战略中将越来越重要。今后日中之间物流管理系统战略的实施,应考虑如下两种模式:一是实施完全推迟战略,生产、物流管理均依据推迟原理,按客户的每个订单组织生产,直接送货上门,通过缩短交货期、采用高水平物流管理,来满足精细化的市场需要;二是实施与高效率生产体制互动的供应模式,按照国际标准生产,进行高效率生产,考虑日本市场需要,同时通过各种管理方式的有效组合,降低生产成本,满足顾客特殊需要。日中之间的物流管理系统必须与市场相结合,不断满足每个客户的需要,才能实现整个流通环节的高速度和物流服务的高水平。     

IS JAPAN'S HOUSEHOLD SAVING RATE REALLY HIGH?

This paper discusses, and measures the quantitative impact of, a number of conceptual issues relating to the household saving rate data in the National Accounts of Japan. It finds that Japan's seemingly high household saving rate is biased due to the exclusion of capital transfers and real capital gains, the valuation of depreciation at historical cost rather than at replacement cost, the use of a residual measure of financial saving rather than Flow of Funds Accounts data thereon, and the treatment of expenditures on consumer durables as consumption rather than as saving, but that the biases are to a considerable extent mutually offsetting. It also finds that the Japan-U.S. gap in household (personal) saving rates is due largely to conceptual differences and deficiencies and that household saving in Japan consists primarily of financial saving (net lending), meaning that most of it is available to finance investment in other sectors of the economy and/or abroad.     

Is the eldest son different? The residential choice of siblings in Japan

In this paper, we analyze the determinants of the living arrangements (coresidence behavior) of elderly parents and their children (whether elderly parents live with their children, and if so, with which child) in Japan using micro-data from a household survey. Our results provide support for all four explanations of coresidence behavior but especially for the life cycle and dynasty models (both of which assume selfishly motivated parents) and social norms and traditions: the fact that parents who were self-employed before retirement are more likely to live with their children, the fact that parents are less likely to live with sons who adopt their wife's surname, and the fact that parents are more likely to live with daughters whose husbands adopt their surname constitute evidence in favor of the dynasty model. The fact that parents who were (relatively wealthy) executives before retirement and parents who are homeowners are more likely to live with their children and the fact that parents are more likely to live with less educated children constitute evidence in favor of the selfish life cycle model (or the altruism model). And the fact that parental attitudes toward their children affect their coresidence behavior, the fact that parents are more likely to live with their eldest child if their eldest child is a son, and the fact that parents are most likely to live with their eldest son even if he is not the eldest child constitute evidence in favor of social norms and traditions.     

Optimal Hedging of Basket Barrier Options with Additive Models and Its Application to Equity Value Separation Problem

At the heart of optimal hedging with additive models in Yamada (Recent advances in financial engineering: proceedings of the KIER-TMU international workshop on financial engineering, World Scientific, pp 225–245, 2010; Proceedings of the 2011 American control conference, pp 3856–3861, 2011; Asia-Pac Financ Mark 19(2):149–179, 2012) is to replicate the payoff of European basket options using separate options as close as possible. In this paper, we extend their technique for the case of path-dependent barrier options, where the mean square error of the payoffs between the basket barrier option and the sum of options on the individual assets is minimized over any smooth payoff functions. To this end, we propose to represent the underlying assets using the Brownian bride decomposition and show that computations involving conditional expectations of basket barrier options boil down to those of unconditional expectations. This procedure enables us to provide an algorithm to compute the necessary and sufficient condition for the optimal hedging problem based on the Monte Carlo method. Then, we consider to apply our methodology to the Black–Cox type first passage time structural model, where a defaultable company possesses/runs multiple assets/projects and the default may occur the first time the asset value hits a certain lower threshold before the maturity. We formulate the equity value separation problem using additive models, in which individual equity values are introduced so that their sum approximates the total equity value as close as possible. It is also shown that any portion of total equity value may be assigned as an initial value of each individual equity when using the optimal smooth functions. Finally, we examine the contributions of individual equity values to default or survival by applying a certain normalization for conditional expectations via numerical experiments to illustrate our proposed methodology.     

The Turnover of Market Leaders in Growing and Declining Industries: Evidence from Japan

This article explores the turnover of market leaders in the manufacturing and information and communications industries in Japan. We propose indices for market mobility by focusing on the turnover of market leaders and examine how the likelihood of the turnover of market leaders differs across industries. We provide evidence that market leaders are more likely to be replaced by competitors in growing and declining industries, relative to industries where the growth is more stable. Moreover, the results reveal that the turnover of market leaders is more likely to occur in research and development-intensive industries. Furthermore, the interaction effects of industry growth and concentration indicate that the turnover of market leaders is more likely to occur in declining industries with high concentration.     

A simulation analysis of systemic counterparty risk in over-the-counter derivatives markets

Journal of Economic Interaction and Coordination - In this paper, we propose a simulation framework to assess systemic risk in over-the-counter derivatives markets. We incorporate credit valuation...     

Optimal Hedging of Prediction Errors Using Prediction Errors

Wind power energy has been paid much attention recently for various reasons, and the production of electricity with wind energy has been increasing rapidly for a few decades. One of the most difficult issues for using wind power in practice is that the power output largely depends on the wind condition, and as a result, the future output may be volatile or uncertain. Therefore, the prediction of power output in the future is considered important and is key to electric power generating industries making the wind power electricity market work properly. However, the use of predictions may cause other problems due to “prediction errors.” In this work, we will propose a new type of weather derivatives based on the prediction errors for wind speeds, and estimate their hedge effect on wind power energy businesses. At first, we will investigate the correlation of prediction errors between the power output and the wind speed in a Japanese wind farm, which is a collection of wind turbines that generate electricity in the same location. Then we will develop a methodology that will optimally construct a wind derivative based on the prediction errors using nonparametric regressions. A simultaneous optimization technique of the loss and payoff functions for wind derivatives is demonstrated based on the empirical data.