Impact of the Regulatory Strength of National Ministries of Trade in Japan

Impact of the Regulatory Strength of National Ministries of Trade in Japan
Impact of the Regulatory Strength of National Ministries of Trade in Japan

The Regulatory Strength of National Departments of Trade in Japan. In the midst of the global financial crisis, a number of countries enacted regulations to control trade.

The impact these regulations had on the economies these countries were large, but varied depending on how highly regulated the trade industry was.

 

Unlike other industries, and industries with a less developed regulatory system, there is little regulation for traders and importers in Japan’s trade ministry; as such rates are not regulated by governmental agencies and caps are set by market forces instead. As such, while Japanese exports have been weak both domestically and overseas as a result of reduced demand from China this has not led to much economic pain.

 

The Trade Ministry’s performance can be summed up in four major areas;

 

As a result of the lack of regulation, the Japanese government has not had much power to control the nation’s trade. This has led to the deregulation of Chinese exports from China which private firms are allowed to negotiate with this being successful.

 

For example, in 2007, Japan imported $100 billion worth of Chinese goods but only $8 billion worth was exported back to China (including textiles and auto parts but excluding monies for capital investment).

 

It should be noted that as companies are not subject to regulation when importing materials or components into Japan they may not purchase these items on the domestic market instead purchasing them on the international market at lower prices.

 

As a result, companies are then forced to purchase less expensive goods on the international market. It should also be noted that many Japanese companies have also relocated their manufacturing bases overseas as a result of weak demand in Japan.

 

 

One factor mentioned as related to the economic performance of Japan has been its market economy; however, this is not entirely true; as the Japanese economy is largely regulated by governmental agencies and corporates have little power to influence local or national economic policy.

 

Instead, the monetary policy set by the Bank of Japan and taxes set by various ministries determine what behaviour is best for the Japanese economy.

 

Once again it should be noted that there is no regulation for trade in Japan meaning that competition does not exist so costs are lower for firms. As a result, the cost of goods in Japan are lower as well.

 

In addition to this, the Japanese government has increasingly moved away from Keynesian economics and towards monetarism or “credit-based” economics which is exemplified by the Bank of Japan’s rise in interest rates. While it has happened since the financial crisis of 2008, there have been great concerns that this renewed focus on monetary policy will have negative impacts on economic growth.

 

The deregulation and continued focus on monetary policy will likely lead to further problems in the Japanese economy in that while it is dominating global economies it is also diluting them (Dell’Ariccia).

 

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