Economics Commentary Essay

The collusive1 securities patience structure that the japanese traditional industry has traced oer preceding(prenominal) years has increasingly become to fail. The purpose of companies abandoning cross- piece keepings2 has generated a in deep sparing loss gisting from a reduce in the total tax of corporations in the country. The attempt of industries such as steel, paper and energy as hygienic as car making companies and electronic firms3 to consolidate economic articulationnership done means of oligopoly, has decreased deliberately from 50% of the market values to 20% everyplace the last 17 years.The benefits of section holding companies were determined in preceding multiplication to maximize profits by jointly agreeing in a fixed legal injury which will avoid equipment casualty wars and thereof substantial tax revenues4. Also assuming the interdependent behaviors, cross-sh areholding companies act together to establish extravagantly barriers of entry to the ind ustry in read to preserve ascendancy and evade scrap to have a high indices of charter. As the extract mentions, there is a bought share between companies to hold on the overhaul of others and to mystify the number of firms within the market as it happened with Mitsubishi when 11 other companies had an acquisition of shares to hitch the outsider.As these companies were subdued to expense controls of the industry, the posit geld will consequently be highly inelastic responding to the few amount of substitutes5 that the industry seeks to have in flow.However the concerns about the crumbling of the traditional tendency of cross-shareholding are given with the results in the channelize of behavior of the industry. Along with the abandonment of share holding companies, the industry becomes vulnerable to out-of-door entry and in the case of Japan foreign investments which cast ups competition. As there is increase in supply of same outputs, demand for products of individual firms will fall and the demand curve will shift to the left.requirement shifts to the left from D1 to D2 due to the increase in supply with the entry of new firms and the removal of a unique hurt of product in the whole industry.As the result in the shifting of the demand curve of any Nipponese product prices of apparently reduce as shown in the previous figure. From P1, being the demand of a cross-holding trammel of the market, and P2 the consequent reduction of this model. Quantity produced besides lessens from Q1 to Q2 as costs of production are directly proportional to the loss of profit6 with the fall prices.Due to price decline, total revenue overly decreases as both criterion and price of products decrease considerately. The impacts of this phenomenon on Japanese economy is illustrated with losses of the questioned firms. Between touch and September more than than 160 shareholding companies confounded a total of 300 billion in value. 610Banks and monetary institu tions have also been affected as these companies are part of the essential capital they lend against. condescension the increase in cross-shareholding companies since 2004, the evident economic impact of the criss-crossed capitalism are starting time to arise. The Japanese government in solution has been working on regulatory measures to prevent this phenomenon future repercussions.Works Cited * Economic ground Demand and Supply. In the internet http//www.investopedia.com/university/ economic science/political economy3.asp, s.t.* Economic Basis Monopolies, Oligopolies and Perfect Competition, s.t. In the internet http//www.investopedia.com/university/economics/economics6.asp, s.t.* Introduction to economics* WHITTEN, Darrel. Japan Japans organization Of Interlocking Shareholdings. In the internet http//www.mondaq.com/article.asp?articleid=24335, 2004.1 A commonly accepted price determination of oligopolists to prevent competition of prices over similar products.2 When to or more firms3 hold each other shares.3 Institutions that employ production factors to produce and therefore sell goods and services.4 The resultant economic gains of multiplying the price of a good times the quantity of that good sold (TR=pxq).5 Similar products with certain differentiations that determine price elasticity of demand.6 Net income in gains of a businesses activity.