Thursday, April 29, 2004

Re: Japanese bubbles

What I see from Paul's viewpoint is the reaction what we have seen. In the class I referred Kenichi Ohmae's book The Boarderless world (Publisher Harper Collins : 1990) which predicted the same fall. Kenichi argued that Japanese corporations created this trap by playing on the cost conscious idealogy. In his book he clearly correlates various other points also which led Japan to the economic crisis before it happened and what I suggested was one of the major aspects of it. Interestingly, R. Taggart Murphy in one of his HBR article "Power Without Purpose: The Crisis of Japan's Global Financial Dominance" also proposed a fantastic viewpoint which I am attaching here. "Japan is the most powerful financial force in the world. It is the wealthiest country, and because its wealth is so concentrated, it can easily move markets anywhere in the world. The failure of Continental Bank of Illinois and the October 19, 1987 stock market crash both started in Tokyo. When Great Britain and the United States were world financial leaders, each had a sense of global mission that required stability and openness in the world's financial markets. Japan has no such ideology. Indeed, Japan is unwilling to allow the yen to serve as a global reserve currency, and it does not ensure liquidity in the world's banking system" I hope this will lead our learning and discussion further.
Regards, Paurav

Nokia price cut back

Also (I've obviously got little else to do but publish stuff on bloggers) -
FT page 1 - 'Nokia cuts prices to grab back lost market' - interesting article relating to last nights lecture.
Reads like a case study - should Nokia lower prices and gain back market share - or keep them the same and hold up profit margins??
cheers

Paul

Japanese bubbles

Dear all,

a question relating to Paurav's points relating to the Japanese economic collapse. My understanding is that it was caused by interest rate hikes following years of boom and asset price inflation. The crash was so great that banks and companies bad debt led to mass bankruptcy and hit individuals very hard in terms of stock market collapse and falling asset prices. Lack of confidence has since hit the ability of the authorities to rekindle eocnomic activity.
Paurav made reference to the type of production - ie Japan producing high quality/low price goods and thereby being surpassed by South Korea. To what extent was that a contributing factor considering the wider macro-economic issues?
I'm very interetsed in Japan fundamental economics and recovery from the share price perspective!

cheers

Paul