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This paper presents a simulation model based on the growth rate, the inflation rate, and the consumption tax rate in the future. Future tax revenues and fiscal expenditures are projected using regression models estimated from past data. The fiscal situation is called unsustainable if the outstanding amount of Japanese government bonds (JGBs) becomes higher than the level of private sector financial assets. We focus on the general account of the central government, which is the source of JGB issues. We find that the higher the economic growth, the more likely it is that the fiscal situation is sustainable. When a larger portion of interest income is reinvested in JGBs, the chance is higher that the fiscal situation is sustainable. Most importantly, raising the consumption tax to 20% guarantees fiscal sustainability in most cases. Our analysis shows that without a consumption tax hike beyond the 10% rate, a fiscal crisis will be almost a certainty, even with a real economic growth rate of 2% despite a shrinking labor force. A reasonably quick hike of the consumption tax, namely a hike by 1% a year, up to 20%, combined with high or moderate economic growth rates, seems to keep the economy out of a fiscal crisis, where a moderate growth rate is defined to be generated by a productivity increase per working-age population of 1.9%, which was the average during the Koizumi years.

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Asian Economic Policy Review
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Takeo Hoshi
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Historically, in Japan, out-of-court corporate restructurings have played a significant role in disciplining managers in the near-absence of hostile takeover activity and shareholder activism. This paper analyzes management turnover in a large sample of Japanese firms that underwent restructurings between 1981 and 2010. I find that restructurings that happen in later stages of financial distress, and those that are not initiated by the firm itself, are more likely to involve management turnover, as are restructurings in which the firm's main business operations are left intact. Furthermore, in restructurings after the reforms around the year 2000, management turnover is more likely to occur if the local potential managerial labor market is substantial. After controlling for firm characteristics and the firm's initial financial condition, it does not appear that management turnover is associated with an improvement in post-restructuring operating performance--in fact, the effect is significantly negative by estimates that address the non-random nature of management turnover. However, for restructurings led by equity funds, management turnover is associated with a more successful turnaround of the firm's performance. These results suggest that equity funds possess the ability to locate and recruit talented outside managers in a thin market for experienced managers.

 

Michael Furchtgott is an economist interested in corporate finance and governance. His current research investigates Japanese corporate restructurings and the behavior of firms and lenders when financial distress arises.

Furchtgott has completed his PhD in economics at the University of California, San Diego, where his research on corporate financial restatements has demonstrated that firms frequently circumvent laws designed to protect investors.

He holds a BA in economics and mathematics from Columbia University.

Daniel and Nancy Okimoto Conference Room

Shorenstein APARC
Encina Hall C331
616 Serra Street
Stanford, CA 94304-6055

(650) 724-9747 (650) 723-6530
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Shorenstein Postdoctoral Fellow in Contemporary Asia
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Michael Furchtgott is an economist interested in corporate finance and governance. His current research investigates Japanese corporate restructurings and the behavior of firms and lenders when financial distress arises.

Furchtgott has completed his PhD in economics at the University of California, San Diego, where his research on corporate financial restatements has demonstrated that firms frequently circumvent laws designed to protect investors.

He holds a BA in economics and mathematics from Columbia University.

Michael Furchtgott Postdoctoral Fellow in Contemporary Asia Speaker Shorenstein APARC
Seminars
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Co-sponsored by the Stanford Center for International Development

Under what conditions is decentralization most likely to foster development and reduce poverty?  Plausible answers include:  a sufficiently committed central government; local checks against corruption; and sufficiently resourced actors able to deliver public services effectively. Indonesia is a good place to explore the explanatory power of these and other propositions, thanks to the country’s diverse local conditions and the rapid and sweeping (“Big Bang”) decentralization that it underwent in the late 1990s.  In his disaggregation of the Indonesian case since then, Dr. Sumarto will examine whether, how, and why poverty alleviation has been helped or hurt by particular economic, social, and political variations in the context and character of local governments across the archipelago.

Sudarno Sumarto was an Asia Foundation Visiting Fellow at APARC in 2009-2010.  In 2001-2009 he was the director of SMERU, a highly regarded independent institute for research and public policy studies in Jakarta.  He has served as a consulting economist for the World Bank, the Asian Development Bank, among other organizations, and has taught in Indonesia’s leading universities. His latest publication is Explaining Regional Heterogeneity of Poverty:  Evidence from Decentralized Indonesia (co-authored, 2013).  Earlier titles include more than sixty co-authored books, working papers, articles, chapters, and reports on topics such as poverty, decentralization, employment, vulnerability, and economic growth.  His degrees in economics include a PhD and an MA from Vanderbilt University and a BSc from Satya Wacana Christian University (Salatiga).

Lunch will be served.

Philippines Conference Room

Sudarno Sumarto Senior fellow Speaker SMERU Research Institute
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In this eleventh session of the Strategic Forum, former senior American and South Korean government officials and other leading experts will discuss current developments in the Korean Peninsula and North Korea policy, the future of the U.S.-South Korean alliance, and a strategic vision for Northeast Asia. The session is hosted by the Korean Studies Program at the Shorenstein Asia-Pacific Research Center, in association with Korea National Diplomatic Academy, a top South Korean think tank.

PARTICIPANTS

United States:

Michael Armacost, Distinguished Fellow, Shorenstein APARC, Stanford University

Karl Eikenberry, Distinguished Fellow, Shorenstein APARC

Siegfried Hecker, Professor, Management Science and Engineering; former co-director, CISAC, Stanford University

Thomas Fingar, Distinghished Fellow, Shorenstein APARC

T.J. Pempel, Professor, Political Science, University of California, Berkeley

Gi-Wook Shin, Professor, Sociology; Director, Shorenstein APARC, Stanford University

Daniel Sneinder, Associate Director for Research, Shorenstein APARC

David Straub, Associate Director, Korean Studies Program, Shorentein APARC

Kathleen Stephens, 2013–14 Koret Fellow, Korean Studies Program, Shorenstein APARC

Seoul, Korea

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Reports of the detention and eventual release by North Korean authorities of an 85-year-old Palo Alto retiree, Merrill Newman, spurred a wave of media interest. Newman, a Korean War veteran, had decided to go on a tour of North Korea, apparently in part to revisit the place where he had served more than 60 years ago.

He was accompanied by a fellow retiree, Bob Hamrdla, also a Palo Alto resident. According to accounts provided by Hamrdla, Newman was taken off the plane as he was leaving the country after a nine-day tour. During his detention, Newman was videotaped reading an apology, in which he accepted responsibility for “hostile acts” and requested forgiveness.

After 42 days in custody, Newman was released and arrived back in the United States on Dec. 7. Newman was greeted by his family and spoke briefly to reporters, recognizing the U.S. Embassy in Beijing and the Swedish Embassy in Pyongyang for securing his release, before heading home. The full details that led to Newman’s detention still remain unclear.

Both local and national media rushed to understand these events, first reported in detail by the San Jose Mercury News (Nov. 20). Reporters sought out expertise at Shorenstein Asia-Pacific Research Center, speaking to Associate Director for Research Daniel Sneider and to Korean Studies Program Associate Director David Straub, who both have long experience with Korea and have been frequently cited as experts.

Sneider was cited in newspaper reports in the San Jose Mercury News (Nov. 20) and the Los Angeles Times; was interviewed on local radio, and also interviewed for broadcast on the evening news programs of the CBS, ABC and NBC networks local affiliates. Straub was quoted by NK News, a leading agency specializing in coverage of North Korea, also cited by the Washington Post. Most recently, Sneider was cited in the San Jose Mercury News (Dec. 7) upon the confirmation of Newman’s release.

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 Abstract:

That the Cairo Conference has been overshadowed by the wartime summits at Teheran and Yalta is understandable given the start of the Cold War in Europe almost immediately after the German surrender in May 1945. To understand the collapse of relations between the Anglo-American allies on the one hand and the Soviet Union on the other, it is important to look at the conferences at Teheran and Yalta, the interactions between Churchill, Roosevelt, and Stalin, the understandings they reached, and their misunderstandings. That said, the Cairo Conference also marked an important turning point in the relations between the allies in the war against Japan: China, Great Britain, and the United States, the consequences of which were critical to the defeat of Japan and the post-war order in East Asia.

The interaction of Churchill, Roosevelt, and Chiang in Cairo is every bit as compelling from a human interest perspective as the interplay between Churchill, Roosevelt, and Stalin at Teheran and Yalta, albeit less studied, and offers a sobering reminder of what can happen when policy is made at the very highest level by individuals who know relatively little about the culture of their partners and are not able to separate myths and stereotypes from realities. Summit conferences may make for good theater, but do not necessarily result in good policies as an examination of the Cairo Conference reveals.

Each of the parties at the Cairo Conference came with their own agendas, frequently contradictory. Generalissimo and Madame Chiang hoped to obtain a commitment to make the China-Burma-India theater of war the focal point in the war against Japan, a matter not only of strategic importance to them but also of poetic justice. They also sought to redress grievances against Japan and Great Britain in the post-war era. Roosevelt hoped to buoy the ego and spirits of Chiang and to insure that the Kuomintang regime would not make a separate peace with Japan thus allowing the Japanese to redeploy the nearly one million troops they had stationed in China. Churchill had no real interest in meeting with Chiang and his wife at Cairo at all, but felt obliged to humor Roosevelt and to make sure that no agreements would be reached in Cairo that would in any way prejudice British colonial interests in Southeast Asia in the post-war era. Given these conflicting agendas, it is no wonder that none of the participants would be satisfied with the results of their labors in Cairo.

 

Speaker Bio:

Ronald Heiferman is Professor of History and Director of the Asian Studies Program at Quinnipiac University in Hamden, Connecticut, and a Fellow of Berkeley College at Yale University. He has also taught at Connecticut College and the City University of New York. Dr. Heiferman was educated at Yale and New York University (Ph.D.). Professor Heiferman has authored or co-authored more than a dozen books, including Flying Tigers (New York: Ballantine, 1971), World War II (London: Hamlyn, 1973), Wars of the Twentieth Century (London: Hamlyn, 1974), The Rise and Fall of Imperial Japan (New York: Military Press, 1981), the Rand-McNally Encyclopedia of World II (New York: Rand-McNally, 1978), and The Cairo Conference of 1943: Roosevelt, Churchill, Chiang Kai-shek and Madame Chiang (McFarland, 2011). His latest book, The Chinese Idyll of Franklin D. Roosevelt, will be published in 2014. Professor Heiferman was a Yale-Lilly Fellow in 1978, a Yale-Mellon Fellow in 1984, and has also been the recipient of five National Endowment for the Humanities Fellowships: Duke University (1974), University of Chicago (1977), Stanford University (1980), Harvard University (1987), and the University of Texas (1991).

CISAC Conference Room

Ronald Heiferman Professor of History and Director of the Asian Studies Program Speaker Quinnipiac University
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Abstract:

Nipah virus lives in large fruit bats in South and Southeast Asia. When people become infected with Nipah virus over half of them die. Nipah virus can also be transmitted from person to person. This talk will describe how this bat virus occasionally infects human populations and causes outbreaks through person-to-person transmission. It will explore the risk of a global pandemic of Nipah virus and consider appropriate policy responses.

Speaker bio:

Stephen Luby is Professor of Medicine in the Division of Infectious Diseases and Geographic Medicine; Deputy Director for Research at the Center for Global Health Innovation; Senior Fellow at the Woods Institute for the Environment and Senior Fellow at the Freeman Spogli Institute for International Studies at Stanford University.

Dr. Luby studied philosophy and earned a Bachelor of Arts summa cum laude from Creighton University. Dr. Luby earned his medical degree from the University of Texas Southwestern Medical School at Dallas and completed his residency in internal medicine at the University of Rochester-Strong Memorial Hospital. He studied epidemiology and preventive medicine at the Centers for Disease Control and Prevention.

Dr. Luby's former positions include leading the Epidemiology Unit of the Community Health Sciences Department at the Aga Khan University in Karachi, Pakistan for 5 years and working as a Medical Epidemiologist in the Foodborne and Diarrheal Diseases Branch of the Centers for Disease Control and Prevention exploring causes and prevention of diarrheal disease in settings where diarrhea is a leading cause of childhood death.  Immediately prior to his current appointment, Dr. Luby served for eight years at the International Centre for Diarrheal Diseases Research, Bangladesh (ICDDR,B), where he directed the Centre for Communicable Diseases. Dr. Luby was seconded from the US Centers for Disease Control and Prevention (CDC) and was the Country Director for CDC in Bangladesh.

Dr. Luby's research has focused on clarifying the burden of several communicable diseases in low income countries and developing and evaluating practical strategies to mitigate their impact. He is currently exploring circumstances where economic and political forces encourage environmental degradation that exerts substantial disease burden in low income countries, with a view to developing and evaluating interventions.

CISAC Central Conference Room

Stephen Luby Senior Fellow, Stanford Woods Institute for the Environment; Sr. Fellow, Freeman Spogli Inst. for International Studies; Research Deputy Director for the Stanford Univ. Center for Innovation in Global Health; Prof. of Medicine, Infectious Diseases Speaker
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Africa (Proceedings of the National Academy of Sciences 2013): USAID and the UN's World Food Program have proposed strategies for allocating ready-to-use (therapeutic and supplementary) foods to children in developing countries. Analysis is needed to investigate whether there are better alternatives. We use a longitudinal data set of 5657 children from Bwamanda to construct a statistical model that tracks each child's height and weight  throughout the first five years of life. We embed this model into an optimization framework that chooses which individual children should receive food based on a child's sex, age, height and weight, to minimize the mean number of disability-adjusted life years per child subject to a budget constraint. Our proposed policy compares favorably to those proposed by the aid groups. Time permitting, we will also discuss a recent analysis of a nutrition program in Guatemala that quantifies the age dependence in the impact of supplementary food, and develops a food allocation policy that exploits this age dependence and reduces child stunting.

India: Motivated by India's nationwide biometric program for social inclusion, we analyze verification (i.e., one-to-one matching) in the case where we possess 12 similarity scores (for 10 fingerprints and two irises) between a resident's biometric images at enrollment and his biometric images during his first verification. At subsequent verifications, we allow individualized strategies based on these 12 scores: we acquire a subset of the 12 images, get new scores for this subset that quantify the similarity to the corresponding enrollment images, and use the likelihood ratio to decide whether a resident is genuine or an imposter. Compared to the policy currently used in India, our proposed policy provides a five-log (i.e., 100,000-fold) reduction in the false reject rate while only increasing the mean delay from 31 to 38 seconds.

A full speaker bio is available on CISAC's website. 

CISAC Conference Room

Graduate School of Business
Stanford University
Stanford, CA 94305-5015

(650) 724-1676 (650) 725-0468
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Jeffrey S. Skoll Professor of Management Science
CISAC Affiliated Faculty Member
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Lawrence Wein is the Jeffrey S. Skoll Professor of Management Science at the Graduate School of Business, Stanford University, and an affiliated faculty member at CISAC. After getting a PhD in Operations Research from Stanford University in 1988, he spent 14 years at the Sloan School of Management at MIT, where he was the DEC Leaders for Manufacturing Professor of Management Science. His research interests include mathematical models in operations management, medicine and biology.

Since 2001, he has analyzed a variety of homeland security problems. His homeland security work includes four papers in Proceedings of the National Academy of Sciences, on an emergency response to a smallpox attack, an emergency response to an anthrax attack, a biometric analysis of the US-VISIT Program, and an analysis of a bioterror attack on the milk supply. He has also published the Washington Post op-ed "Unready for Anthrax" (2003) and the New York Times op-ed "Got Toxic Milk?", and has written papers on port security, indoor remediation after an anthrax attack, and the detention and removal of illegal aliens.

For his homeland security research, Wein has received several awards from the International Federation of Operations Research and Management Science (INFORMS), including the Koopman Prize for the best paper in military operations research, the INFORMS Expository Writing Award, the INFORMS President’s Award for contributions to society, the Philip McCord Morse Lectureship, the Frederick W. Lanchester Prize for best research publication, and the George E. Kimball Medal. He was Editor-in-Chief of Operations Research from 2000 to 2005, and was elected to the National Academy of Engineering in 2009.   

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Lawrence Wein Jeffrey S. Skoll Professor of Management Science; CISAC Affiliated Faculty Member Speaker
Seminars
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About the Topic: This presentation includes a review of significant trends in the development of nuclear energy in China, from the mid1980's until the present, and related future prospects. Among the subjects covered will be: nuclear technology development based on competition/cooperation between a giant state owned enterprise and an upstart commercial utility from the south; different development goals and technology development by the two corporations; the impact of Fukushima on nuclear energy developments in China; the current status of the Chinese nuclear energy system; future growth prospects considering a range of different challenges in the industry; and nuclear technology development prospects and intellectual property issues.

About the Speaker: Chaim Braun is a consulting professor at CISAC specializing in issues related to nuclear power economics and fuel supply, and nuclear nonproliferation. Braun pioneered the concept of proliferation rings dealing with the implications of the A.Q. Khan nuclear technology smuggling ring, the concept of the Energy Security Initiative (ESI), and the re-evaluation of nuclear fuel supply assurance measures, including nuclear fuel lease and take-back. Before joining CISAC, Braun worked as a member of Bechtel Power Corporation's Nuclear Management Group, and led studies on power plant performance and economics used to support maintenance services. Prior to that, Braun worked at United Engineers and Constructors (UE&C), EPRI and Brookhaven National Laboratory (BNL).

CISAC Conference Room

Chaim Braun Consulting Professor, CISAC Speaker
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