Tag Archives: economy

The Lost Decade of the Japanese economy

Reading Time: 4 minutes

The Japanese economy boomed in the 1980s (particularly from the mid-80s onwards). Life was very good (a sense of optimism everywhere!), people bought luxury goods like no tomorrow and in the West, many people started learning Japanese and taking Japanese business classes (learning how to conduct business in a more Japanese way, etc) as many thought that the Japanese economy was set to take over the world (and that all future business transactions worth their salt, would happen in the language of Japanese). People both hailed and feared the economic giant Japan had become (in only 30 or so years since its dim post-war days)!!

Then the bubble economy began to collapse in January 1990 as stock prices crashed (and continued declining through the year)…By 1991 the economy had gone bust and a huge recession had started. Between December 1989 and August 1992 the Nikkei average dropped from 38,915 to 14,309, producing a loss of $2 trillion. With the declining value of land factored in assets shrank by around $10 trillion.

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The decade beyond 1991 is known as “The Lost Decade” (失われた十年).

Like in all economic bust periods, no one person or single factor was to blame for the burst of the bubble economy. But whoever or whatever was to blame, it was little consolation for the endless amount of ordinary souls involved whose livelihoods were destroyed or were severely negatively affected by the disaster.

People struggled in all sorts of ways- many people lost their jobs (and struggled to find any new jobs at all) while those who managed to keep their jobs saw their salaries drop significantly. Many people also found themselves being forced to continue paying for huge loans they had taken out on properties whose value plummeted after the crash (sometimes by 50% or more!). The number of people committing suicide or filing for personal bankruptcy also went up considerably.

The collapse of the real estate values was devastating to Japanese banks. Banks had traditionally relied on the property as collateral for loans. But when real estate values plummeted, the banks were reluctant to call in the loans (because the value of the collateral was considerably less than it was before, causing the banks to lose money).

So Japanese banks were saddled with billions of dollars in debts (and may have accumulated as much as $1 trillion in bad loans, or $5,000 for every Japanese). No one was sure how bad the situation really was…The Japanese government prevented the Japanese banking system from being properly investigated and hid the full scale of the losses sustained by the banks (in a bid to prevent the crisis from being worse than it already was).

And things weren’t necessarily any better by the late 90s! In the late 1990s, the introduction of performance-based salary systems produced higher unemployment rates and coincided with high suicide rates.

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Over the years the Japanese government tried many things to rejuvenate the economy. For example, over $10 trillion was pumped into projects between 1991 and 2001. The projects offered temporary relief but generated huge debt. But a lot of money was spent on projects (dubbed “Bridges to Nowhere”) that Japan didn’t really need.

Ultimately (long story short) none of the government stimulus measures worked very well and Japan ended up building the largest national debt of any industrialized nation in the world. In 2003, the public debt reached $6.4 trillion (130 percent of GNP, and half Japan’s savings and triple the debt rate in 1992). By contrast, the public debt in the United States was $3.4 trillion (or 35 percent of GNP). Most of the debt is held by the government. Even though there is enough money in the banks to cover the debt, most of it is in the form of personal savings (which the government can’t touch).

Japan also suffered from deflation. National wealth declined as property values continued to fall. Companies didn’t invest, so they didn’t expand. So people worried about the future (and save their money rather spent it, figuring that things would be cheaper in the future). Prices declined more, people saved more because they figured prices will drop further.

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Companies lost money and laid-off workers…

There were worries about a deflationary spiral and a depression. Some wanted the Bank of Japan to create inflation, believing that would solve Japan’s problems (but others saw deflation as a symptom of Japan’s deeper problems).

In more recent times…

The New York Times once reported: “Deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism, and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo…A new frugality is apparent among a generation of young Japanese, who have known nothing but economic stagnation and deflation. They refuse to buy big-ticket items like cars or televisions, and fewer choose to study abroad in America.”

Even in 2019, Japan’s economy is still troublesome (and ultimately, all the massive monetary and fiscal stimuli have so far over the years since the bust has failed to really spur faster and more sustained growth). Some of the current ideas to boost and strengthen the Japanese economy are;

  1. Expand the workforce, including by hiring and promoting more women, and by allowing older workers to keep jobs longer.
  2. Counteract aging demographics via immigration.
  3. Generate more revenue to lower government debt.
  4. Institute industrial and labor market changes aimed at more flexible work practices and eventually, wage gains

But the main obstacles to these proposals are:

  1. Cultural workforce “traditions,” rigid seniority systems at companies.
  2. Deep aversion to increased immigration (by both policymakers and the general population).
  3. Pressure against tax increases from consumers and companies.
  4. Resistance from various quarters, including industries, labor unions, and some in workforce, along with a lack of political will.

…And so the difficulties continue.


Links:

https://www.investopedia.com/articles/economics/08/japan-1990s-credit-crunch-liquidity-trap.asp

https://fee.org/articles/80s-fears-of-a-japanese-economic-pearl-harbor-look-silly-today-but-theyre-instructive/

https://en.wikipedia.org/wiki/Economy_of_Japan

https://www.nytimes.com/2010/10/17/world/asia/17japan.html?_r=1&scp=1&sq=the%20great%20deflation&st=cse

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Instagram. From the picture-sharing platform to the powerful marketplace.

Reading Time: 2 minutes

It is hard to find a person who has never used or at least heard of Instagram. This social media is growing like wheat and does not give competitors any chance. Instagram is known as a platform where people can upload pictures or videos to share them with the subscribers. Well, to be precise, it used to be like that. Now, Instagram is becoming a social monster that has every feature you can think of. Imagine yourself scrolling your Insta feed and there is an amazing pair of jeans. You dream of getting them. Guess what, now you can do it in one click! 

Instagram marketologists never forget to follow all the trends and see what users actually want. This platform is an outstanding example of market research and customer-orientation. This way instagram is confidently becoming a huge market place.

Even though Instagram does not call itself “a market place”, a lot of users are happily developing their business there. Initially, its users simply shared their photos, but with the growth of the Instagram audience, entrepreneurs began to actively use it to present and promote their products. According to statistics, 48% of small businesses have Instagram accounts, and this number is constantly growing.

Instagram is primarily a visual presentation using photos, so it is best to sell products that can be “presented by the face”: clothing, gadgets, handmade products, children’s products, products for healthy lifestyle and weight loss, cosmetics and the like. However, many people successfully use this network to promote an intangible product – services, consultations, training, marathons and other things. The key disadvantage of Instagram is the inability to accept payments using built-in tools (due to the lack of such tools). But knowing the rapid tendency of developing, no doubts, these tools are going to enter the market soon. 

Two years ago, shopping tags appeared on Instagram. One click on the image allowed users to find out the cost of the product, information about it and instantly go to the site to buy it.

Shopping Tags are special price tags that are displayed on the photo when the user touches the image. On the preview of posts, you will immediately see an image of a white basket – this is how all publications with similar labels are marked.

The new functionality of Instagram opens up previously inaccessible business opportunities: now, in order to buy a favorite thing from a picture, just click on its photo. The click will redirect you to the product description page, and then to the online store to make a purchase.

Tags are available not only in the usual posts, but also in stories. In addition to the key selling function, they can help you get to know your customer even better and get statistics on traffic to your online store.

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The Pareto principle

Reading Time: 2 minutes1dfa217dd226d88bf12c87f3e368d91f-640x351

20% of products used in food, form 80% fat. 20% of your neighbors provide 80% of the noise. 20% of employees in your office make 80% of all work. The 80/20 rule you’ll find anywhere.

In 1897, Italian economist by the name of Pareto estimated that 20% of British families own 80% of the money. He tested it on a rule green peas in your garden: 20% of pods give 80% of the total harvest. This pattern works under all circumstances and in all cases.

The Pareto principle can be stated as: any situation is always a minority that is more important and useful than others.

On practice:

20-percent

The Pareto principle (20% of efforts provide 80% of the results)
– For business: 20% of customers generate 80% of your income. They require your attention.
– For students: 20% of the pages of the textbook contains 80% of all necessary information. Focus on the 20% – and grasp the new book.
– For all that not all of our daily tasks are equally important. Of the ten cases that you have planned for today, there are two more important than the other eight.

We must learn to identify the 20% to start with them. If you do not focus on the 20%, you have wasted 80% of the time. We will never alter all things, but it can handle 20%. And do not kill for the remaining 80%. Ability to prioritize and not grasp it all at once – one of the most important qualities. At first, priorities can not be entirely accurate apart, but regular exercise this will power the emphasis will shift to the side of the main results, and not sprayed on trifles.

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