During the 1990's Japan's research policy has added a significant focus on basic research to the traditional strength on applied research and development. Now, globalization and industrial restructuring require new concepts. The focus of reform startegies therefore shifts to industry - basic research linkages.

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Science and Research in Japan 

Asian Integration Strategies add value to the region`s economies if they go beyond simple FTA`s. But the implementation of successful Economic Partnerships (EPAs) requires a good strategy.

After quite some thought, I recommend to start with trade, of course, but to focus on Asia`s most severe common problem from the start: finance.

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Asian Integration Strategy 

The EU has turned away from its focus on administrative (de-)regulation and harmonization efforts, or institutionalized “market optimization,” towards cooperation policies that focus on “policy optimization” by centralizing monetary policy and setting strict rules for fiscal policy. Unlike earlier (and current) attempts with more limited fixed exchange rate regimes, the EMU has proved to be a strong enforcement mechanism for further market-based structural reforms without requiring further political integration.

The currently disputed fiscal restrictions, on the other hand, have the potential to cause neo-functional spillovers towards more political integration, but the EU does not seem to be moving in this direction.  On the contrary, based on the current progress in structural reforms, and the EU’s general stance towards cooperative approaches with complicated schemes of checks and balances, the EU rather seems to be on the way towards an increasingly sophisticated economic union with more regional autonomy and accountability.

Economic Policy Integration 

European Enlargement 

Here is one of my more optimistic research papers on Japan. It claims that accumulated governance changes during the last decade now start to shift the "rules of the game."

Changing the Rules of the Game 

Japan is in a structural crisis that has its roots in the preservation of a postwar model of stakeholder governance and the maintenance of a “Dual Economy” between productive manufacturers in international competition and (relatively) unproductive non-manufacturing sectors that produce for a rather protected domestic market. Comprehensive market reform is necessary to solve these problems. Corporations clearly need more flexible labor and capital markets, competitively priced inputs, and the integration of high-grade outside skills.
An analysis of Adjusted TFP Change Rates shows that the manufacturing sector, but also utilities, transport and communications have strong growth potentials if they are able to cut their excessive use of capital and labor. The service sector, however, is not as productive as
it should be (and this is even worse for the construction and real estate sectors). To establish the service industry not only as a pool for surplus labor, but also as an engine for growth for the entire economy, its production system clearly needs to undergo serious reform
after market restrictions have been abolished and competition increased.

Full Text: Industry in Japan

There is wide agreement that governance in Japan during the period of "high growth" was based on a system of contributions from different stakeholder groupings, closely interlinked as "insiders" of the corporate finance and production process. In the meantime, however, the system has outlived its usefulness by becoming too complex for a mature economy. As a result, governance is moving to a system of "outsider" or shareholder participation and control. This transformation remains costly and time consuming because the closely linked system of stakeholder interests requires a stepwise introduction of profit-oriented governance in accord with acceptance of different stakeholder groups (the government, bureaucracy, management, suppliers, workers, etc.).
This paper concentrates on the question of why it has been (and is) so difficult to implement this turnaround, and if the current reform plans are up to the task.

The paper was published in the Quarterly Economic Journal of the German Institute for Economics. Have a look at that version.

Full Text: The Reform of (Corporate) Governance in Japan

In the late 70s, most major central banks accepted monetary stability as a precon-dition for a sound development of their economies, and vowed to refrain from interference into the economy in “real” or “structural” terms. Central banks seemed to have accepted, adopted, and even executed a monetarist paradigm, which claimed that monetary policy, although effective in the short-run, is at best neutral in the long run. Most central banks therefore tried to avoid any involve-ment into long-term, structural issues, became independent from  overnment, and even tried to enhance their “neutrality” by adopting monetary policy rules.
More recently, however, at least two central banks stick out as major exceptions: the Federal Reserve of the U.S. and the Bank of Japan. Both institutions are confronted with economic conditions they consider as “structural” changes, and they react by overruling the conventional central banking wisdom, which calls for a mere stabilization of a given development path of the economy. The underlying arguments are simple and sweeping: revolutions in information technologies, market flexibility, and governance have changed the economy (U.S.), or have changed the world economy but not the domestic economy (Japan), and “neutral-ity” therefore requires an as-early-as possible adaptation of monetary policy to the new realities.

Full Text: Structural Monetary Policy

Full Text: Activation of Japanese Regions

Full Text: Decentralization

When preparing and entering the European Monetary and Economic Union (EMU), most European countries turned their longstanding approach to integra-tion upside-down. As a reaction to the increasing significance of international capital flows, they switched from a trade-oriented emphasis on ever-increasing (de-) regulation (but poor macroeconomic stability), to a regime of strict rules for monetary and fiscal policy.

Beyond short-term distrust and policy deadlocks, this concept of macroeconomic stability and reduced interference in private markets should unlock growth per-spectives by providing room for (regional) capital flows and private market initia-tives. This conceptual turn from microeconomic to macroeconomic harmonization offers an important example for other countries in need of stability and growth - although the currency union itself cannot directly be used as a blueprint for eco-nomic stabilization in most other regions.

Full Text: EMU