Business Study Skills Individual Report
Abstract
The study investigates the economy performed in Japan over the last decade. The studies have shown that there has been an increasing based on an unmanageable model of unbalanced economic growth. The study finds that there was a surprise fall in GDP from 2.1% to 1.6% in Japan due to debt brought by household consumption and increase in sale tax. This has made Japan’s economy to shrink. The government expenditure has developed by 29%, which outdo the rest of the economy growth. There is actual prove that there was a fall in GDP of business investments from 11.7% to 10.5% that was the worst in the G7.1. The study concluded that Japan’s economy contracts in row for second time in a quarter. Japan is experiencing the worst fall since the year 2011 after the country was struck by tsunami and earthquake.
Section 1
Introduction
Today, much organization, and employees are experiencing the effects of economic growth. The impacts of the economic growth can be either positive or negative. Economic growth is the aggregate income of an economy increases over given period. Economic growth reflects that economy is getting wealthier, and lifestyles of an individual are getting healthier, development of technology, and wages increase and the unemployment rate gets lower. Economic growth is estimated in terms of real GDP that is the total market value of goods and services produced. Besides that, the country’s economic growth is significant particularly to those developed countries (Cheung, 2005). For instance, Japan since this would bring an effect to the country’s advancement as well as to remain competitive in terms of trade. Hence, economic growth becomes a set as a desirable objective to all economies in such a position. A good advancement of the economy will bring the country money and advances the citizens’ quality of life. Nevertheless, there are many impacts of economic growth, which are divided into positive impacts and negative impacts. The positive impacts are an improvement in quality of living standards, income distribution, and equitable growth while the negative externalizations are resource reduction, negative environmental, and the consumerism impact (McDowell, 2012).
The key objective of this study was to determine the impacts of economic growth on the company that was established in Japan. In addition, the study determines economic growth in the country in general and the methods company use to manage a stable economic growth.
Significance of the Study
The primary group that may benefit from this study is the companies in today's business organizations and may learn how economic growth affects performance of the company. Identifying the negative impacts may permit them to take essential action to cope with the economy.
Review of Related Literature
Company that is based in Japan experience cycles of the economic growth as well as the contraction of economy based on several factors. These factors include the consumer preference and general health of the markets. Below are the key factors that economist consider first and offer a healthy environment for any company in Japan.
The Gross Domestic Product (GDP) is one of the key gauges used to estimate the health of the economy of a particular country. Economic growth causes an increase in real GDP. GDP symbolizes the total dollar value of all services and goods produced over a specific period. In other words, it is the size of the economy. Typically, GDP is expressed as an evaluation to the prior year or quarter. For instance, if the every year GDP is up 4%, this, therefore, means that the economy has grown by 4% over the previous year. The rate of growth of the economic usually measures the yearly percentage increase in real GDP (BBC News, 2014).
The following are several factors affecting economic growth. However, it is supportive to divide them up into supply side factors and demand side factors. Demand side factors encourage the growth of aggregate demand (AD). AD= C+I+G+X-M, thus, a rise in investment, exports, consumption or government expenditure lead to increase in AD as well as increase in economic growth. AD is affected by the following factors (McDowell, 2012). When interest rates lower, they make companies invest, and consume to spend more since it makes borrowing cheaper. Consumer confidence, confidence in business and consumer about the forthcoming time, result to spending and borrowing hence increase economic growth. Asset prices, increasing of house price leads to a wealth impact that is positive. In Japan, house price is a significant aspect since several people own their homes. Real wages, currently, in Japan there is a deteriorating of actual wages (Beck & Weber, 2005).
Rising of inflation above the nominal wages has resulted to decrease in actual incomes. Real wages cause consumers to reduce on spending and eventually reducing perches of items that are not basic. Exchange rate value, if pound devalues there is high possibly of import taxation becoming more expensive and exports becoming more competitive. Therefore, this leads to demand for domestic services and goods. The reduction could result into inflation, nevertheless in the short-term (BBC News, 2014). At least it can contribute to a boost in economic growth. When there are losses of money from the bank result to difficulties in lending making it to be very difficult for companies and consumers to take a loan. Hence, this leads to deterioration in investing in business. Factors that enhance long-run growth in economic in a particular country are levels of infrastructure, human capital, and development of technology. On the other hand, factors affecting growth in the short term are commodity prices, weather, and political instability.
Inflation is a measured how much expensive is a set of goods and services become over a definite period, commonly a year. Inflation has made countries be into long periods of instability. Inflation means there is a constant upsurge in the price level. The key causes of inflation are excess aggregate either demand or cost-push factors (McDowell, 2012). Demand-pull inflation occurs when the country’s economy is at or near to full employment, and there will be an increase in AD, which leads to an increase in the price levels. A country experience demand pulls inflation when economic growth rises above the long-run trend rate of growth. Second point is cost-push inflation (Palmer, 2012). If a country experience increase in the cost of its firms, rising wages will increase, import prices will become expensive leading to an increase in inflation.
Pressures on the demand or supply side of the economy can also be inflationary. Expectations also contribute and play an important role in determining inflation. When firms anticipate higher prices on goods and services, they develop these expectations into wage negotiations (Beck & Weber, 2005). The minute inflation sets in, and it becomes difficult to reduce inflation. For instance, higher prices will cause workers to demand higher wages causing a wage-price spiral. Consequently, expectations of inflation are vital. If individuals expect high inflation, it inclines to be self-serving.
Supply and demand determine exchange rates. For instance, if there were greater demand for American services and goods then, there would tend to be an appreciation that is an increase in value of the dollar currency. If markets were in fear about the progress of the Japan economy, they would tend to sell Japanese yen, leading to a depreciating in the yen's value. A higher exchange rate lowers the country's balance of trade, whereas a lower exchange rate would increase country's balance of trade. Exchange rate is relative and is expressed as a comparison of the currencies of two particular countries. Below are main factors that influence exchange rates.
Inflation, in the Japan inflation, is relative than elsewhere globally. This makes the exports of Japan to be more competitive. Therefore, increasing demand for Japanese yen when it comes to purchasing Japan goods. Lower inflation rates in the country tend to appreciate the value of the currency (McDowell, 2012). Interest rates, when the interest rates of Japan rise than elsewhere it becomes relative and attractive to deposit money in the Japan. As result, the value, and demand of the Japanese yen will raise a process called hot money flows. Higher interest rates cause an appreciation (BBC News, 2014).
This year, Japan recorded an inflation decline of 3.20%. Japan’s consumer price index includes food with the highest percent of 25 and housing 21% (Beck & Weber, 2005).
Section 2
Findings, Conclusions, and Recommendations
Introduction
The study was designed to determine the impacts of economic growth in the Japan country and how companies coup with economic growth to balance their existence. In addition, there were studies among the countries that company’s goods and services are sold. These include US, China and UK. Questionnaires were distributed in United Kingdom, China, and United States, and the response was 87.4%. The section includes the Findings, Conclusions, and Recommendations.Findings
The finding is in sections according to the following characteristics
Demographic profile
A comparison of Japan and European Union inflation is much different. The UK economy grew slightly more than the prior quarter of 2014. According to the Office for National Statistics, this has reviewed and approximated to be 0.8% to 0.9%.
Japan’s inflation rate reduced to its least low, therefore, worsening job creation. This highlights the deviation between advancement in the policymaking and economy projection. Officials from Japan have worn a brave face regarding deterioration of economic growth. They have considered solid employment as a strategy of underlying economic strength.
The consumption tax increase is part of a policy designed to get Japan's government debt managed. The debt of the Japanese government is currently above 240% of GDP. In addition, the government continues to run deficits of approximately 8% of GDP per year. Nevertheless, the first part of the deficit-reduction policy, and preliminary increase in the consumption tax happened earlier this year. These lead to an important contributor to the Japanese economic slowdown (Beck & Weber, 2005).
Historical Inflation Rates (CPI)
The importance of inflation and GDP to the company will have:
- Increase Aggregate Demand (AD) for services and goods will upsurge very fast than supply. As a result, this will cause prices to increase.
- Companies will also have to increase wages because of the tight labor market and reduces competitions. The company raises wages to consumers in the form of higher prices as it looks to maximize profits (Beck & Weber, 2005).
The data from the CPI and ERI rates are used in numerous means by the government and companies, and play a vital role in setting economic policy. That is because the Bank of England uses inflation to set interest rates. If the Bank's Committee of Monetary Policy contemplates, this will result in CPI inflation to be above 2% in the subsequent two years or so. In other words, it may raise interest rates in order to try to subdue it (McDowell, 2012). Equally, if the committee reasons inflation to be below 2%, it will result in cutting interest rates (Beck & Weber, 2005).
Historic CPI Inflation Japan
Conclusion
The Study Concluded that economic growth only considers the increase in real output that is real GDP over a period caused by additional resources that are production inputs. Economic growth is a subset of development. Development is broad-based, and for growth to support economic development, it has to be inclusive. Using the above table, two overviews of Japan, United States, UK and China are represented first is the annual inflation for every year, thus comparing December-to-December CPI of the year before and the average inflation in every month as per the calendar (Cheung, 2005). The company export sales of goods and services seem to penetrates the markets of U.S, UK and China than in Japan due to economic growth.
It is significant to consider the long-term benefits of economic growth to the company by considering GDP, inflation and exchange rate. The study concluded that the economic growth and economic development are two different terms. However, they are used simultaneously but both have diverse aspects. The study concluded that the development is broader than the term growth (McDowell, 2012). Economic growth is the increase in national per capita and income. While development growth is an increase in every filed or aspect, economic growth is seen due to improvement of development. The quality of standard of living may not only be the overall level but also be contingent on the distribution of GDP among the citizens of a country (Beck & Weber, 2005).
Recommendations
The study finds that in order to have an efficient system of modernization quite a few measures are needed. Therefore, the finding, and the conclusions support the recommendations below.
Better management in the company, which will increase a powerful role in a managerial sector hence contribute in economic growth. The company must strengthen human resources to reduce barriers to work in the company (Palmer, 2012). Economic growth in the United Kingdom, China, and United States has seemed to rise throughout the year 2013 though it was driven mainly by development in household consumption. The same growth is predicted to develop decisively in the year 2014 and 2015, with some re-balancing towards investment. When the labor market performed strongly, it resulted to decrease in inflation pressures (Beck & Weber, 2005). The United Kingdom, China, and United States are recommended to correct their excessive deficit by the monetary year 2014-2015 at the latest. As emphasized in the year 2014 in-depth assessment that was presented by the Commission on 5 March 2014, the United Kingdom also remains to experience macroeconomic disproportions, which require policy and monitoring action.
Generally, Japan has made progress in addressing the 2013 country-specific recommendations. It has taken several strategy measures to inform infrastructural needs, youth unemployment, financing of SMEs, welfare reform, and childcare. The experts are implementing appropriate strategies but need to keep being vigilant to any encounters that may ascend during implementation. Challenges remain in relation to the housing market, including the need to increase the supply of houses to help reduce rapid increases in house prices and the need to raise investment in infrastructure (McDowell, 2012).
References
BBC News, 2014, July 8, BBC News - United States country profile - Overview. Retrieved from http://www.bbc.com/news/world-us-canada-16761057
BBC News, 2014, November 12, BBC News - United Kingdom country profile - Overview. Retrieved from http://www.bbc.com/news/world-europe-18023389
BBC News, 2014, November 17, BBC News - Cameron: UK must hold firm among global 'warning signs'. Retrieved from http://www.bbc.com/news/business-30075810
BBC News, 2014, October 2, BBC News - China country profile - Overview. Retrieved from http://www.bbc.com/news/world-asia-pacific-13017877
BBC News. 2014, September 30, BBC News - Economy tracker: GDP. Retrieved from http://www.bbc.com/news/10613201
Beck, G. W., & Weber, A. A, 2005. Inflation Rate Dispersion and Convergence in Monetary and Economic Unions: Lessons for the ECB.
Bergen, J, 2014, March 12, Factors That Influence Exchange Rates. Retrieved from http://www.investopedia.com/articles/basics/04/050704.asp
BERR (2008) Cross Country Productivity Performance at the Sectoral Level: The UK Compared with the US, France and Germany.
Buttonwood, 2014, November 14, Employment, wages and monetary policy: The acid test | The Economist. Retrieved from http://www.economist.com/blogs/buttonwood/2014/11/employment-wages-and-monetary-policy
Cheung, Y., & Lai, K. S, 2005, Nominal Exchange Rate Flexibility and Real Exchange Rate Adjustment: Evidence from Dual Exchange Rates in Developing Countries. Factors That Influence Exchange Rates.
Krussell, P. & Smith, A. (2002) ‘Revisiting the welfare effects of eliminating business cycles’, Carnegie-Mellon University Working Paper
McDowell, M., & Thom, R, 2012, Principles of Economics 3rd european edition. Berkshire: McGraw-Hill UK.
Palmer, N, 2012. The Importance of Economic Growth. Economic Growth, 1, 1-6.
Reinhart, C. & Rogoff, K. (2009) ‘The aftermath of financial crises’, American Economic Review Vol. 99(2).
The Economist, 2014, January 25, China’s economy: In three parts | The Economist. Retrieved from http://www.economist.com/news/finance-and-economics/21594999-some-chinese-economic-indicators-are-moving-right-direction-others-are
