A FREE-MARKET CURE FOR JAPAN`S CHRONIC COLD
The key thrust of the article entitled A Free-Market Cure for Japan ‘s Chronic Cold by Glenn Hubbard is that the economic revitalization of the Japanese economy , which is projected to improve global growth , is anchored on the two (2 ) initiatives championed by Prime Minister Junichiro . The success of these initiatives however depends largely on Japan ‘s ability to expand faster by boosting its productivity . U .S experience demonstrates ‘ according to Glenn Hubbard , how competitive and efficient capital markets can stimulate expansion . The increase in U .S . productivity growth over the past [banner_entry_middle]
decade is not just a story about information technology . Innovations , while important , are globally available , and America ‘s productivity gains have outstripped those of other countries . Key to the quick adaptation of productivity improvements in the U .S is capital markets that fund major companies and entrepreneurial upstarts alike (1 ‘ This is the lesson that Japan needs to learn
While Japan has been making progress in its corporate restructuring (nonperforming loans-which act as a tax on entrepreneurship by keeping capital from reaching up-and-coming borrowers-have been trimmed , the recent move of Koizumi in privatizing the slumbering Japan Post , which is a state-owned corporation whose saving and insurance arms manage a gargantuan 3 .3 trillion , still presents many more challenges that Japan needs to overcome (Hubbard 2005 . Hubbard proposes that The Japanese commercial code must be amended to allow foreign acquirers to pay for acquisitions with stock as well as cash , the practice in most of the industrial world (1 ‘ The Koizumi administration , in to revitalize the economy through mergers and acquisitions , must maintain its strong support for allowing cross-b mergers and acquisitions using stock swaps (Hubbard 2005 . A competitive market for corporate control must also be established
The other potential advantage of the privatization of the Japan Post is that the huge assets under its management into private hands could stimulate competition in financial services and productivity , as capital becomes allocated more nimbly and efficiently (1 ‘ While this may allow for a faster expansion of the Japanese economy and theoretically boost productivity , the issue regarding the advantages that Japan Post has been granted by the government must also be examined
This Reform ‘ according to Hubbard , would allow entrepreneurs (such as Horie ) to thrive . People all over Japan would gain from faster productivity growth and higher incomes . And the global economy would benefit as well (1
At the onset , it is but proper to point out that there has never been a guaranteed formula for economic growth . While there may be many sound theories and studies , it is recognized even in econometrics that there will never be a perfect solution to the economic woes of a country , much more that of more complex and larger economies such as Japan . A key aspect that was briefly mentioned and must be taken into consideration is the political atmosphere in Japan (Choy 1987 . The reforms that Hubbard proposes are all well meaning and theoretically sound but they fail to see the impact… [banner_entry_footer]
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