The CIRJE International Conference on Financial Crisis , Market Economy, and the Government

-International Perspective September 7-8, 1998 -

Sanjo Conference Hall, University of Tokyo

Outline

Outline

The Center for International Research on the Japanese Economy (CIRJE) held an international conference to commemorate its establishment on September 7-8, 1998. The conference set up three major themes concerned with the current economic problems confronting Japan and the world economy.

The theme of the first part of the conference was the financial crisis attacking Japan and South East Asia. The South East Asian countries including Korea and Japan have been suffering from serious financial crisis since the early 1970s. The fragile banking sector with huge amount of non-performing loans has been exerting bad influence on the real side of domestic economy. On the other hand, the slowdown of real economy seems to have exacerbated the non-performing loan problem in the banking sector. Thus, we are facing a vicious circle between the fragility of financial sector and depressive macro economy. Moreover, financial crises in individual countries of this area not only are interacted with each other, but also they have been seriously influencing economies outside of this area. What policy should we take in order to deal with this financial crisis? The CIRJE conference discussed this policy issue based on the experience we had for the last few years. Some scholars and experts participated in this discussion and exchanged valuable information.

The theme in the second part of CIRJE conference was the role the government should play in the market economy. A well-functioning government is essential for good performance of the market economy. What is the appropriate role of the government in the market economy is, however, a difficult question in practice. We have seen many trials and errors since 1980's, some of which are making dramatic impact. One illustration is the use of novel auction forms to allow market-based allocation to replace administrative allocation. The recent wave of innovation began with the airwave auction in the U.S., which has been adapted for sales of airwaves in several other countries and also applied in deregulating electricity markets. With leading scholars who participated in the development in the novel auction and in its various application, we discussed new directions in the role of the government in market economy.

Another issue in the second part was how the government can speed the development of a viable private sector in the transferring economies. Easing access to finance promotes the growth of firms, as do policies that assure entrepreneurs they will be allowed to keep the returns on their investment. The CIRJE discussed relative effectiveness of these policies.

The theme of the third part of the conference was comparative study of international competitiveness in the manufacturing sector. Did the Japanese industries lose its international competitiveness in the late 1990s? This is quite important and serious question. The answer seems to differ sharply depending upon the types of industries. What we need is a series of comparative analyses based on systematic data collection and careful interpretation. Taking manufacturing systems in the auto industry as an example, this part of the conference analyzed relative competitive performance of the European, US and Asian auto manufactures in such fields as production, supplier systems, and product development.

The specific program of the CIRJE conference is presented below. The CIRJE conference accepted more than one hundred participants in total, and succeeded in stimulating active exchange of opinions among them. We hope the CIRJE will hold another international conference in the coming year 1999. The CIRJE have already started planing the conference. The theme will be some issues related to the "crisis" of the pension system.

Part One: The Current Financial Crisis in South East Asia:What Lessons Should We Learn?

Abstract

The South East Asian countries including Korea and Japan have been suffering from serious financial crisis since the early 1970s. The fragile banking sector with huge amount of non-performing loans has been exerting bad influence on the real side of domestic economy. On the other hand, the slowdown of real economy seems to have exacerbated the non-performing loan problem in the banking sector. Thus, we are facing a vicious circle between the fragility of financial sector and depressive macro economy. Moreover, financial crises in individual countries of this area not only are interacted with each other, but also they have been seriously influencing economies outside of this area. What policy should we take in order to deal with this financial crisis? We are going to discuss this policy issue based on the experience we had for the last few years. Some scholars and experts will gather to exchange the valuable information and to draw specific conclusions for us.

First Session: Lessons from Individual Countries

Crisis in Korea

  • Presenter: Yung-Chul Park (Korea University)
  • Commentator: Yukiko Fukagawa (Aoyamagakuin University)

Crisis in Indonesia

  • Presenter: Iwan J. Azis (Cornell University and University of Indonesia)
  • Commentator: Akira Kohsaka (Osaka School of International Public Policy)

Crisis in Thailand

  • Presenter: Khun Aswin Kongsiri (The Bangkok Bank of Commerce)
  • Commentator: Hidenobu Okuda (Hitotsubashi University)

Second Session: Macroeconomic and Institutional Aspects of Financial Crisis

The Exchange Rate Origins of Japan's Economic Slump in the 1990s

  • Presenter: Ronald McKinnon (Stanford University)
    Kenichi Ohno (National Graduate Institute for Policy Studies)
  • Commentator: Akiyoshi Horiuchi (University of Tokyo)

Are East Asian Economies Facing an Institutional Turning Point?
From the Comparative Institutional Analytic Perspective

  • Presenter: Masahiko Aoki (Stanford University and MITI)
  • Commentator: Akiyoshi Horiuchi (University of Tokyo)

Third Session: Panel Discussion

What Lessons Should We Learn from the Current Crisis?

  • Presenter: Takatoshi Ito (Hitotsubashi University and University of Tokyo)
  • Discussants: Ronald McKinnon (Stanford University)
    Toru Iwami (University of Tokyo)
  • Moderator: Akiyoshi Horiuchi (University of Tokyo)

Part Two :New Directions in the Role of the Government in Market Economy

Abstract

A well-functioning government is essential for good performance of the market economy. What is the appropriate role of the government in the market economy is a difficult question in practice, however. We have seen many trials and errors since 1980's, some of which are making dramatic impacts. One illustration is the use of novel auction forms to allow market-based allocation to replace administrative allocation. The recent wave of innovation began with the airwave auction in the U. S., which has since been adapted for sales of airwaves in several other countries and also applied in deregulating electricity markets. With leading scholars who participated in the development in the novel auction and in its various applications, we discuss new directions in the role of the government in market economy. Another issue that we take up in the session is: what can governments in reforming economies do to speed the development of a viable private sector? Easing access to finance promotes the growth of firms, as do policies that assure entrepreneurs they will be allowed to keep the returns on their investment. The relative effectiveness of these policies will be examined.

Innovative Auctions and their Uses

  • Presenter: Paul Milgrom (Department of Economics, Stanford University)
  • Disucussant: John McMillan
    (Graduate School of International Relationsand Pacific Studies, University of California, San Diego)

Building the Private Sector: Property Rights vs. Finance

  • Presenter: John McMillan
    (Graduate School of International Relations and Pacific Studies, University of California, San Diego)
  • Disucussant: Masahiro Okuno-Fujiwara (Faculty of Economics, University of Tokyo)

Part Three: New Developments in Manufacturing Systems--International Comparisons

Abstract

Did the Japanese industries lose its international competitiveness in the late 1990s? The answer seems to differ sharply depending upon the types on industries. What we need now is a series of comparative analyses based on systematic data collection and careful interpretation. Taking manufacturing systems in the auto industry as an example, this session will analyze relative competitive performance of the European, US and Asian auto manufacturers in such fields as production, supplier systems, and product development.

Japanese Production Methods Revisited
-Exploring the Adoption, Diffusion,and Evolution of Superior Manufacturing Systems-

  • Presenter: Frits Pil (University of Pittsburgh)

Comparing and Analyzing Supplier Systems

  • Presenter: Nazli Wasti (Middle East Technical University and University of Tokyo)

Comparing and Analyzing Product Development Systems

  • Presenter: Takahiro Fujimoto (University of Tokyo)