Japan case study solution:

Qno1: 1. In the 1980s Japan was viewed as one of the world’s most dynamic economies. Today it is
viewed as one of its most stagnant. Why has the Japanese economy stagnated?

Answer: Japan has succeeded in improving the country in many areas after three decades of robust
economic growth; Japan becomes the world’s second-largest economy. However, Japan’s economy is
seen as discomfort for some of reasons: One of the main factors leading to this situation is the economic
system of Japanese. Due to increased the rate of US dollar, the price of imported goods decreased, the
amount of surplus rose, their economic growth based on exporting, and has experienced a period of
economic bubbles as speculation. The unsustainability and the globalization wave made Japan economy
entered a period of prolonged stagnation. The sustainability of the Japanese economic system has been
put a question mark.

The decline of asset prices has caused the inevitable impact on Japanese economy. There are two
problems caused pressure on the Japanese economy:

The first is the deficit of the state budget. Japan central bank solved this issue by pumping more money
into the economy.

Second financial issue of Japan is bad debt. After the collapse of the bubble economy, prices of assets
such as land, stocks, etc. declined rapidly, financial of many banks became worse, which caused
bankruptcy.

Question no 2: What lessons does the history of Japan over the past 20 years hold for other nations?
What can countries do to avoid the kind of deflationary spiral that has gripped Japan?

Answer: I suppose it’s impossible to solve the problem of deflation in a short time. We need to have a
thorough preparation so as not to affect other sectors. First of all, it’s necessary to identify the cause of
deflation. Once understanding the situation, we may know how to prevent, or minimize it.

It can be seen that one of the basic elements caused deflation is tightening monetary policy too much.
Deflation caused by monetary tightening is accompanied by bad debt and the collapse of the
commercial banks as debt deflation. It’s necessary to continue tracking movement of deflation and its
risks.

First of all, using all strengths to stimulate production and increase aggregate supply. Improve the
efficiency of investment, encouraging the development of economy. Besides, being very cautious and
careful with monetary policy in reasonable ways and in proportion to the economic development
situation.

Question no3: What do you think would be required to get the Japanese economy moving again?
Answer: The cause of the Japan’s economic recovery is the increasing of production and exporting while
private consumption has stabilized. Besides, the recovery of many areas is also being improved. BOJ said
Japan would continue the monetary policy easing to achieve the inflation target at 2%.

The backbone of economic policy is growth strategy. This strategy aims to encourage technological
innovation in all areas and encourage the creation of activities in the private sector, which is necessary
for long-term recovery of Japan's economy.

Question no 4: What are the implications of Japan’s economic stagnation for the benefits, costs, and
risks of doing business in this nation?

Answer: While Japan’s domestic economy is not grow, Japanese companies tended to bring their money
to invest at other foreign countries. Besides, loan demand in Japan is weak; the Japanese investors seek
overseas loans. Thus, with this situation, bringing investment funds into Japan is not conducive while
investors in Japan gave up their market to seek for other opportunities. Besides, Japan population is
aging rapidly also makes domestic market demand becomes narrow. Hence, the disadvantages in cost,
market diversification, loans were limited etc are the factors to consider when investing in Japan at this
time.

Question no 5: As an international business, which economy would you rather invest in, that of Japan or
that of India?

Answer: When investing in any other country, we have to be certain about our understanding of that
country, such as: political situation, economy, moral issues, culture, etc. In addition, we also have to
clarify which segments, areas, and objects we want to target while balancing between risk and profits
factor.

Investor can invest to India in the fields of agricultural, aquaculture and seafood processing, food
processing, footwear, furniture and wood products as the staples of Vietnam. , India's nominal GDP is
forecast to rise from $2.7 trillion in 2021 to $8.4 trillion by 2030'. India is likely to overtake Japan as
Asia's second-largest economy by 2030 when its GDP is also projected to surpass that of Germany and
the U.K. to rank as the world's No. 3, IHS Market said in a report on Friday. According to this I will prefer
investing in India as it’s economic condition is better than Japan.