What Are Some Important Characteristics of the Japanese & South Korean Market Economies?
The rapid growth of the Japanese market during the post-World War II years and up to the late 1980s, as well as South Korea's boom --- primarily between the 1970s until the 20th century's last decade --- have drawn the interest of economists throughout the world. Professors of economics such as Randall Morck and Bernard Yeung and such publications as the Economist and EconomyWatch have studied the two markets and determined the elements distinguishing them from the so-called developed Western economies.
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South Korean Chaebol
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In South Korea large conglomerates with operations throughout the world, including Samsung and Hyundai, dominate the market. Such conglomerates are called "chaebol" and, according to the Economist, are the main force behind the country's booming economy, helping it to quickly recover from the Asian financial crisis of 1997. Past governments, as well as President Lee Myung-bak's administration, have vigorously supported the growth of chaebols through economic incentives, tax relief and outright promotion. However, this policy has limited entrepreneurship in relatively young businesses, such as Internet search and gaming.
South Korean Defence Market
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The Korean peninsula had been the stage of a full-scale war between North and South Korea from 1950 and 1953, which has left a legacy of a heavily guarded demilitarized zone and no peace treaty. Until the early 1970s, South Korea depended almost exclusively on the United States for its arsenal, but the 1973 Law on the Defense Industry and the 1974 Force Improvement Plan proved the turning point to this one-way relationship. Since then, military expenditure has grown rapidly, reaching $156 billion between 2007 and 2011, with part of the production available for sale in the international arms market. The Defense Acquisition Program Administration (DAPA), formed in early 2006, is the government agency in charge of South Korea's procurement and sales of military equipment.
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Japanese Keiretsu
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Japan's own market giants include the so-called keiretsu, a type of vertically-integrated business groups. Such groups include Mitsubishi, which includes group companies such as Mitsubishi Electric for electronics, Mitsubishi Motors in the car industry and Nippon Yusen in shipping, among others. Businesses included in a keiretsu can come from diverse markets, contributing to this strictly Japanese model. Keiretsus differ from Korean chaebols, as their subsidiaries are not organized in a single corporate structure.
Interest Rates in Japan
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The banking sector has been a major force behind the Japanese economy's effort to catch up with the West. As economists Randall Morck and Bernard Yeung mention in their joint study, "Japanese Economic Success and the Curious Characteristics of Japanese Stock Prices," banks struggle to keep interest rates at a very low points --- around 0 percent --- in order to prevent a rise in capital cost. In theory, this guarantees a low cost for investments. However, after the "lost decade" of the 1990s, this policy has been described by observers, including British newspaper "The Guardian," as a method of supporting tottering organizations which are "too big to fail," such as the Daiei supermarket chain.
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References
- The Economist: "The Chaebol Conundrum"; March 2010
- GlobalSecurity.org: South Korean Defense Industry
- NUS Business School: "Japanese Economic Success and the Curious Characteristics of Japanese Stock Prices"; Randall Morck, Bernard Yeun
- The Guardian: "Japan's Zombie Economy - Not Buying but Browsing"; Charlotte Denny; Nov 2002
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