10 Oct /13

Perfect Positioning: Japan and the Pacific Rim

Pacific Rim economyBasic economic theory dictates that sustained growth is achieved through diverse and international trading rather than restrictive economic policy. Nowhere is this principle more evident than in the history of Japan. By the 1980s, export-driven trade and innovation had transformed a shattered post-war economy into a global economic powerhouse. While it is undoubtedly true that the aftermath of the Fukushima disaster and the global recession continue to stifle Japan’s economy, the nation is slowly regaining its status as the engine of the Pacific Rim by employing the same time-tested principles that have driven the Japanese economy for decades.

Exports
The key to Japanese economic success has always been exports. From the cheap, low-quality commercial radio receivers of the 1950s to the high-tech electronics of today, Japanese engineers have always had the ability to successfully design and market innovative products. As Japan’s economy matured and production prices increased, Japanese companies were forced to consider offshore production facilities for manufacturing and distribution. Naturally, the solution was to invest in neighboring Pacific Rim nations. For example, from 2002 to 2012, Japanese investments in South Korea increased by almost 500% ($5.2 billion to $25.6 billion). Likewise, Chinese assets increased by over 600% ($12.4 billion to $93.2 billion). Japan’s export-driven economy therefore not only boosts the country’s own economic recovery, but also fuels growth across the region.

The Pacific Rim Promise
Without a doubt, a single-market Pacific Rim economy has the potential to become the world’s largest and most lucrative trading zone. Much in the same way that the Silk Road trade routes brought prosperity to the isolated medieval cities of Central Asia, its modern equivalent will bring sustained growth to participating economies. Japan in particular is perfectly positioned to benefit from this developing market not only because it is strategically positioned in the middle of the rapidly expanding Pacific Rim region between China and the United States, but also due to its already export-oriented economy.

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