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Japan's International Competitiveness Essay

644 words - 3 pages

When looking at key monetary aggregates of Japan where Big Drive Auto is located, you have to factor in the effective exchange rates to understand Japan’s international competitiveness. This international competitiveness is affected by variables of the existing exchange rate and foreign and domestic price movements. Exchange rates for each currency are quoted and released by the International department, Bank of Japan. According to the Bank of Japan statistic on foreign trade, the following countries and regions import 90.20 % of Japan’s export products. They are (ranked high to low) the United States ... US$135.9 billion (22.9% of total Japanese exports), European Union ... $87.6 billion (14.7%), China ... $80.1 billion (13.5%), South Korea ... $46.6 billion (7.8%), Chinese Taipei ... $43.6 billion (7.3%), Hong Kong ... $36 billion (6%), Thailand ... $22.5 billion (3.8%), Singapore ... $18.4 billion (3.1%), Malaysia ... $12.5 billion ...view middle of the document...

Tariffs range from 10% to a high of 37.5%. Any reductions in tariffs will provide opportunities to not only expand Japans economy but will help small companies like Big Drive Auto to grow as well. Japan has already entered into FTA’s with Singapore as 98% of tariffs have been eliminated between the two countries. Japan also has an FTA agreement with Mexico 90% of tariff will be eliminated by 2015. (Library of Congress, 2005)
Companies like Big Drive Auto will benefit from advantages gained from free trade agreements. FTA’s drive expansion of export and import markets as well as improving businesses competitive environments. FTA’s also could also help reduce political economic frictions between countries, as well as creating trust among countries.

With the down turn in the global economy impacting all trading nations and Japan’s economy largely based on its exports, it is starting to see signs of recovery as exports and production are starting to show signs improvement as overseas economies start to come out of there economical down turns. However investment in fixed business assets continues to decline reflecting in weak corporate profits. Japans long term lending rates averaged around 2.29%, with short term lending averaging around 1.5%, until the market fallout during the last two quarters in 2008. To help the economy to rebound the Bank of Japan reduced its interest rate to 0.3%. For Big Drive Auto, these low interest rates could play a positive factor when breaking into new markets in different countries. (Bank of Japan, 2009)

My concern with Big Drive Auto is that compared to its competition with Toyota, Nissan and Honda, they would be considered a small firm. Small manufacturing firms tend to have less ridged pricing and do not have strong negotiating powers like larger firms have. This can lead small firms to have sharp decreases in their cash flow, resulting in sharp reductions in investments and labor until the economy recovers.

References
 Bank of Japan. (2009). Statistics . Retrieved October 8, 2009, from http://www.boj.or.jp/en/index.htm
 Congressional Research Service ˜ The Library of Congress.(2005). Japan’s free trade agreement program. Retrieved October 9, 2009, from http://www.nationalaglawcenter.org

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