The Role Of Trade In Japan’S Economy

Trade policies role in economic growth is very important, trade policies offers countries competition and wide range of choices. Trade includes exports (are produced goods and services of the country and sales to foreign countries) and imports (the goods and services you get or avail that produce and sell by other countries) in line with this trade gives economic growth because the more output produce will increase your Gross Domestic Product (GDP means total market value of all final goods and services produced within a given period within a country) and Productivity. It is should the net exports equal or must relatively good when positive or exports is high than imports, you can get it from calculating exports minus imports or what we call the rest of the world.

It is also important in trading to know where you can get best advantage or comparative advantage where in for example two countries trade a specific good, it is important the countries knows where or what good to specialize and can get maximum satisfaction and income. Trading is very important not only economic aspect but also in environmental relations of countries and partnerships, it is also gives implication to producers to produce at best and extensively to meet the standards of the global market, competition takes place and consumers has wider range of choices but the government should always do its role on protecting small markets, time to make them competitive and some rules on tariffs, quotas and restrictions to protect the domestic market as well.

Trade relies not only on countries participating, the rules and restrictions but also on exchange rates which varies, given for example Japan exports electronic gadgets at 500 yen or amounting of $300 and USA produces wheat and export to Japan, then when the currency of yen appreciates (Appreciation means it takes fewer units of dollars to buy a single unit some or other foreign currency) so the dollar depreciates (depreciation means that it takes more units of dollar to buy a single unit of some or other foreign currency) instead of $300 for 500 yen it becomes $400 the dollar depreciates and so less the amount of electronic gadgets they can avail same as to Japan scenario if the dollar appreciates and Japan currency depreciates less the amount of goods of wheat they can get.

When a country’s currency appreciates (rises values relative to other currencies) the foreign goods become cheaper and the country’s or domestic goods become more expensive, in result domestic goods are more expensive than foreign or imports goods so imports will rise having cheaper foreign goods and more units can acquire for certain amount of money and exports will fall having currency appreciated domestic goods are more expensive so less people will penetrate to buy those domestic goods.

It will also give certain changes in consumer spending as dollar appreciated the value of money is less than it’s worth so people or consumers will consume or will spend less and giving the fact that domestic goods prices are high they will consume for necessities but not as high as when a currency depreciated and people will rather save than hold on to money.

A currency appreciation and depreciation is both important and give changes to an economy but it is more overly important on how it will affect a certain economy that suits on what type of business cycle being faced and how the government will cope to market interventions and policies for the needed certain fiscal or monetary policy actions for the economy to continue its development or boom and to stabilizes and prevent fluctuations and also so really the exchange rates vary so trading partners or countries invest and trade to countries with stable or less risky and less fluctuation of exchange rate to eliminate their risk costs or unpredictable costs and deficit.

Another aspect of trade policy depends on the country problem or situation needed to cure, solutions or to improve the economic condition on it. In terms of United States of America (USA) now they are facing downturn that might lead to recession and stock market is not working good, high mortgage debt and financing so much on Iraq war, what they have to do to control is to have fiscal policy of expansionary by cutting taxes and also monetary policy of expansionary by lowering interest rates and controlling the money supply and inflation so more income, more demand and more output be produced thus increased in Gross Domestic Product (GDP means total market value of all final goods and services produced within a given period within a country) and disposable income and increase in standard living of people but expansion not in terms of producing or financing war activities because it gives impact on investors that their money is at risk.

In terms of the Philippines since they are facing recovery period and still developing country what they have to do is to have a fiscal policy of contractionary which is raise in tax to limit the income for consumption and use tax generated in developing infrastructures, technological innovations, industry development, government facilities, communication and a monetary policy of contractionary also by increasing the interest rate so that people tends to save more than consume all the income and the savings will be used by financial sector investments and in line with it is a government intervention on trade policies and restrictions so that competition is in place and still protecting the consumer, producer, small market and domestic companies.

Inline with Japan they are facing high cost of living, example a can of coke is equivalent to one burger and drinks with other countries I think they can do is the federal reserve of Japan is to limit or control the money supply circulating, to avoid the loss of its value and inflation of prices, they can do such inflation targeting and monetary policies on controlling money supply, I think it will be also suitable to import goods so that the domestic goods tends to decrease their prices to meet the prices of foreign goods, make it cheaper for consumers availability and wide range of choices on the other hand it will not kill the producers for the government will intervene and thus it will make them to give their best and globally competitive.

Let us also see what happen to Japan after the World War and what makes their economy at this point, as discussed below:

Japan concentrated on their economic growth after the World War II period, they accommodated global and regional policies, good relations with other countries trough leadership which become policy maintenance in political and foreign affairs and expanding economic relations as well. This policy become successful