An Analysis Of The Role Of Government Policies In Economic Growth: A Comparative Study Of Japan And Korea

Do you agree with the claim that the Japanese and/or Korean governments cannot do more to enhance the growth of the Japanese and/or Korean economies?

Overview of Economic Growth in Japan

The main purpose of this assessment is to analyze the role of the government in economic growth in a country. The assessment considers the economies of Japan and Korea which has developed significantly over the years. The government plays a vital role in formulating different strategies which are focused towards economic growth and development. In many cases, the plans which are formulated by the government are not appropriate and the same has direct impact on the economic growth and development of a country. The analysis will be considering the economic growth which is achieved by Japan and Korea. The assessment undertakes a critical assessment of the present growth rate in both the economy.

The economy of Japan can be regarded as a highly developed economy and another main feature which can be identified about the economy is that the economy is market oriented. As per the recent estimates of the economic status of the country, the economy is regarded as the third-largest in terms of nominal GDP and forth largest in the world in terms of purchasing power parity. The economy has faced certain contraction phases as well as certain expansion phases. Another aspect which can be associated with the economy of Japan is that there is high inflationary situation present in the economy.

As per the estimates of 2004, the economy was able to make a turnaround from the condition of stagnation which had affected the country during the crisis of 1990s. The economic crisis situation is apparent from the analysis of the GDP growth rates which showed a swift decrease in GDP estimates of 1.5% which further decreased in 2000s to around 0.9%. The growth rate in the economy stayed lowed during the period of 1990s and 2000s and the same is registered to be between 0.3% and 1.9% respectively.

                                                      Figure 1: (Gross Domestic Product of Japan)

The above figure shows fluctuations in GDP of Japan. The fluctuation in the graph line effectively shows increase and improvement in the estimates of GDP from the year 2015. During the 2010 period, there was a significant fall in the GDP of the country and the same suggest that the economy had experienced a decrease. The above graph also shows that the beginning of 2016 shows significant growth in the estimates of GDP. As per the records, GDP growth in the second quarter of 2016 April-May at a significant fast pace which can be attributed to the increase in the capital expending of the economy. The increase in the capital expenditure in the economy revived the country and ensured that there is a significant growth in the GDP of the business. The only concern in this situation was the economic tension which existed due to trade tension. The growth rate shows an increase in 3% in April-June which was much more than the estimated growth in the country. The domestic demand in the economy also contributed to the increase in the GDP estimates in the economy. The overall increase in the investments from overseas has enhanced and the average increase is estimated to be by 10.7%.

Overview of Economic Growth in Korea

The analysis of the GDP estimates of Japan also shows that there has been significant fall in GDP in between the period of 2010 to 2015 which was recognized to be mainly due to fall in employment and also due to the problem of ageing population. Since the period of 1995, the growth rate of private consumption in this country has been registered as 1% on an average. The situation has significantly improved in current scenario as the recent estimates show that there is a strong growth rate achieved by the economy which can be attributed mainly to the increase in the capital expenditure undertaken by the country.

The economic situation Korea has significantly improved over time and the country which is regarded as the calm of morning of the East. The country has developed into a responsible player and a global power among other global countries. The country has enormous reserves of natural resources stored. The economy of Korea has effectively followed the footsteps of Japan when considering the economic development. The economy has significantly improved both in terms of per capita income and Gross Domestic Product. An appropriate estimate which can be recorded for Gross Domes tic product of Korea in recent times is recorded to be $ 1.6 trillion which is almost around 1/3^rd of the Per capita income recorded for Japan. From the perspective of ranking as well for Per capita Income, Korea is ranked number twelve. The nominal per capita GDP of Korea was $11779 in the year 1995 that reached to around $23021 in the year 2012. This indicates that the amount of GDP has increased significantly in the last few decades.

                                                    Figure 2: (Gross Domestic Product of Korea)

The above chart effectively shows gross domestic product of Korea and the same is shown to have increased significantly over the years. The graph line effectively shows that the Gross Domestic Product of the country has been on the rise significantly. The economy of Korea has experienced a constant growth at an average rate of 7%. During this period, the economy has also experienced two major contractions as well. Another set of reports which are available for South Korea is that the government has incurred significant amount of expenditure for the purpose of developing the economy. In addition to this, the economy has also been affected by globalization and therefore the industrial development in the economy has also contributed to the growth of the economy.

The Korean economy is said to be in a slow growth through since the worldwide crisis of the year 2008. This can be improved further by active involvement of the Government and if appropriate steps are taken for the purpose of improving domestic consumption, high rate of taxes and the welfare services which is provided to the consumers.

Implication of Government Policies Enhancing Economic Growth

The economic growth of the country depends heavily on the policies of the government. In most of the countries, the government formulate strategies with a view point of improving the national product and GDP of the business. One of the policies which have been implemented by the government of Japan is to reduce the overall debt capital in the country by slowly repaying the international borrowings of the country. The reduction in debt capital of the business effectively reduces the risks over the government. In addition to this, the interest burden on the government of the country which may be due to amount of debt capital in the country. The government of Japan is planning to make changes in the debt capital and exchange the same for different perpetuities or bonds. The government also has tried to improve the demand of the economy with a view point of achieving growth in the economy. The demand in the economy has a major role to play in formulation of policies of the government. The economy of Japan is very much market oriented and therefore all the strategies of the government are formulated considering the demand and supply in the Japanese economy. Inadequate demand in the economy would result in government to reduce the taxes in order to encourage courage. A natural position for Japan would necessarily be developments in technology particularly in the service segment namely, development of different diagnostic tools particularly in health care segments

The government of Korea has also developed the country effectively and has undertaken a diverse strategy upholding Trans-Pacific Partnership deal with the US and some other nations as well. This has significantly contributed to the earnings of the business and thereby also increased the GDP of the business even though the rate of growth of GDP has been a bit slower. The focus on the field of agriculture and industry has been placed equally by the Government and thereby this has initiated the development process in the country. Additionally, the policy of the government to undertake an initiative to assimilate women entirely as well as equally into the labour force is an appropriate strategy for the country. This kind of dimensions needs to boost up both productivity as well as the rate of growth. The Government also has significant focus on improving the debt structure of the country and thereby also reduce the interest burden.

There is wide scope of improvement still available in case of South Korea which can be done by the Government following effective strategies. In case of South Korea, an important aspect for achieving growth and development is through technical advancements. The Government has significantly increased the expenditure on states wise research and development for developing technical know-how. This would develop the businesses which are operating in Korea. The Korean Institute of Science and Technology (KIST) is established with a view of improving the technological level in the economy. The government of South Korea has also invested significantly in the education sector development as they are of the view point that increase in the qualification level in the economy which would ultimately increase the GDP of the country. The government of the nation can consider promotion of technical education by means of expansion of vocational secondary schools, technical colleges, and inspired students to study out of the country. In addition to this, the Government can also facilitate and conduct competitive examinations and give appropriate training for the same. In addition to this, the government can also attract competent personnel’s and skilled labour forces from other countries with better facilities, better pay and job security. Consequently, a highly competent, revered set of professionals can help in guiding and at the same time promoting both economic as well as social development. In addition to this, the companies of South Korea can think about accelerating the worldwide business expansion by means of exporting and at the same time foreign production. The Government can bring about special privileges for companies which are engaged in export of commodities. This can be in the form of tax benefits, better access to resources or funds of the business. Therefore, there is a great room for improvement of the economy of South Korea.  The nation can particularly improve the fiscal health, generate greater number of jobs, and enhance levels of income founded on sustainable rate of growth. In view of that, the government has the necessity to attain important policy objectives of stimulating the creative nation not only based on microeconomic tactic but also from a macroeconomic standpoint that can aid in identifying and developing novel sources of income.

The governing body of the nation has the need to dynamically thrust for both quantitative as well as qualitative enhancements of the workforce based on the standpoint of both factor input and generate a financier-friendly environment to inspire higher amount of investments, whilst making continuous efforts to augment total productivity of factor. Based on the outlook of quantitative input of nation’s labour, there is need to enhance overall social employment of women, youth as well as seniors to resolve the imbalance between supply of labour as well as demand and lessen social costs (Flath 2014). This counts welfare expenditure. Based on the outlook of the quantitative labour input, it is obligatory to reform both education and inflate associated investment to stock up human capital. In order to expand overall input of capital in the entire economy, the entire nation shall have the need to enhance its investment environment by delivering superior housing facility for foreign financiers, drastically easing investment-associated rules and re-modelling diverse free zones of economies. This will also have the necessity to execute a stratagem to inspire overall inflow of particularly foreign direct investment.

The government of Japan also needs to increase the focus in exports and productivity of businesses in the country. In recent few years, the growth level in the country has significantly. Government should reconsider the volume of investment in this area to develop a superior class model shielding focus of investment on particular field. The government of Japan and Korea needs to increase the Foreign direct investments in the economy for the purpose of establishing more earnings in the economy. This will also increase the employment level in the economy and this can also contribute to the Gross Domestic Product. The rate of growth of the economy can be considered to be one of the most important sources of jobs. Further, policymakers of the governing bodies of the nation have the need to realize that jobs without having growth can be considered to be dangerous than the jobs without presence of jobs.

The governments need to intervene for setting up a good policy the production and employment generation. Attempts need to be made to pull different economically immobile women into the market for labour (Shim and Lee 2016). This also shall have the need to generate jobs where work and study are compatible to facilitate entry of young individual into the specific market of labour and institute the dual system that can support proper pattern of employment.

The nation also has the need to improve overall state of the nation by upgrading economic system (Buzo 2016).  This can be done through improving regional demand by means of development of superior value-added service segments namely, medical tourism development and welfare, enhancing specific parts as well as material segments into novel strategic export segments and improving overall level of competitiveness of the regional financial segment. The Korean economy is in a need to develop the foundation/basis for invigorating service segment by means of deregulations across the board (Stubbs 2017). Additionally, the economy has to generate high-quality jobs that can fit the value added generated by upgraded service segments by enhancing the reward framework.

There is further Scope of Improvement in case of South Korea as the government needs to increase the level of capital expenditure in the country and in addition to this, the government also needs to take a note of the social needs of the country and also sustainability requirements of the country. The governing authority needs to make efforts to augment overall social accountability of different business enterprises, counting not only large sized businesses but also different government administrative centre, labour unions, different civic grouping together with mass media indicating towards international guiding principles on social accountability. In addition to this, the employment opportunity in the country also needs to be increased which can be done by attracting more foreign investment in the country. Every regulations which are implemented by the government needs to be formulated in such a way that they can contributed in a positive manner to the GDP of the country. An example can be given of the tax regulations which can be used by the government as a tool for encouraging more exports in the business.

Conclusion:

The above discussion shows that there are further scope of development for both the countries Japan and Korea. In Korea, Government needs to secure overall fiscal health in order to cope with enhanced burdens of welfare by means of investment expansion. The government also needs to consider all the risks which the economy faces. By minimizing overall conflicts as well as risks between the two parts of Korea, it can be possible for the government to enhance overall system stability of the entire nation. The government of Japan needs to look after some areas of the economy while in the context of Korea, government involvement is needed more than the former one. The government of both the countries needs to formulate better policies so that the economy can achieve growth and development.

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