The Japanese Economy
... have very similar economic profiles that differ from that of the rest of the world. The data shows that Japan’s outward direct investment exceeds its inward direct investment; it also shows that intra industry trade in Japan is lower than in the other countries. Japan’s small intra-industry trade and inward foreign direct investments are consequence of particular aspects of the Japanese culture and system: A) Until 1980 the government played a protectionist role to allow domestically owned firms to prosper by not allowing foreigners to penetrate the Japanese market. B) The Japanese culture and customs are hard to get used to by foreigners. Language barriers and other customs keep foreigners from investing in Japan. Unemployment Rate is relatively low in Japan and can also be attributed to cultural beliefs. Lincoln argues that normal labor markets are flexible because they can adjust wages and fire/hire workers to maintain the equilibrium point in which MPL = wage rate. This places a burden on the worker because he or she has to deal with uncertainties. The Japanese society has modified the operation of labor markets to conform better to social norms of reducing uncertainties. This modification is what is called “Lifetime Employmen...