WSJ’s Advice to Japan

 

The Wall Street Journal (WSJ) said about Korea, “There’s a lesson here for Japanese Prime Minister Shinzo Abe.”

In a Feb. 13 article titled “Korea’s Lesson for Japan” posted on its website, the WSJ reported that “Amid the recent emerging-market turmoil, a stable exception has been South Korea. The Bank of Korea’s decision on February 13 to hold interest rates steady raised nary an eyebrow among investors.” 

The WSJ added, “Korea has maintained its economic resilience, even as the Korean won has appreciated by 9% against the dollar since early 2012. This belies a central plank of Mr. Abe’s agenda for Japan — that currency devaluation is critical for export competitiveness.”

“Korean companies have held their own against their Japanese competitors over the past year despite Mr. Abe’s dramatic weakening of the yen. Among other reasons, Korean companies have competed globally by improving quality,” the WSJ continued, adding, “Note that Apple’s leading challenger is Samsung, not a Japanese company.”

The newspaper praised Korea’s policies aimed at opening up its economy. It reported, “Trade agreements with the European Union and the US are now in effect, opening formerly sheltered domestic industries to competition and investment. These deals are widely expected to stimulate investment in industries where productivity currently lags developed economies by as much as one-third.” It added, “Seoul has been quicker and more eager than Tokyo to embrace free trade.”

It also pointed out, “Mr. Abe has signed Japan up for the multilateral Pacific trade talks. But otherwise his revival plan consists mainly of a weak yen, old-time fiscal stimulus and nudges to corporate investment rather than freeing the private economy.”

The WSJ concluded by saying, “Korea industrialized largely by following the export-led model of postwar Japan. Perhaps it’s time for the erstwhile teacher to learn a lesson from its former student.”

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