Your Name Your Prof Name University Name Did the fiscal stimulus work during the Japanese Stagnation in early 1990 crisis? Introduction Following strong economic growth in the eighties extending until 1991, the Japanese economy began its long run of stagnation so much so that during the entire decade from 1992 to 2002, Japan saw its real GDP growth rise more than 2% in only 2 of the 10 years…
Download file to see previous pages...
Indeed, the government introduced several fiscal stimuli, they were, however, not effective enough to bring back the growth that the Japanese economy had earlier witnessed. Opinions on the effectiveness of the fiscal stimulus abound in literature written by economists with some arguing that the fiscal stimulus was not successful and actually degraded the economic growth due to the crowding out effect; while others arguing that the fiscal stimulus prevented worsening of the economy and should therefore be considered “successful”. In my opinion, however, the fiscal stimulus did not work and the reason for this, in part, is due to the fact that most fiscal stimulus when actually implemented/applied by the Japanese government was seldom close to what the government actually promised to implement/apply. Therefore, the fiscal stimulus failed to work because whatever stimulus was actually applied was never enough. Following the September 1985 Plaza Accord, the Japanese Yen started to appreciate which led to Japan’s export sector getting badly hit. To counter this appreciation of the Yen, the Bank of Japan drastically eased its monetary policy reducing the interest rate from 5% in January 1986 to 2.5% in February 1987. Soon, the real estate and financial markets began to expand rapidly as a result of this monetary easing, creating a huge financial asset bubble. In response to this, the government increased its interest rate to 6% in 1989-90. The sudden tightening of the money supply led the markets to collapse and thus began the onset of a long period of stagnant economic growth in Japan. The real GDP increased from 428,826 billion Yen in 1990 was to a mere 469,480 billion Yen by the end of 2000 (Powell). Statistical evidence of poor performance of fiscal stimulus The discussion about fiscal stimulus and the Japanese 1990s crisis finds root in the Keynesian economic principles. Keynesian economists preach that during a cyclical trough, discretionary fiscal policies can help the economy emerge from the trough. That is, when the economy goes down due to cyclical factors, the government by introducing fiscal expansionary policy (applying fiscal stimulus) can help the economy maintain emerge from the downturn faster. The Japanese economy in the 1980s saw rapid expansion and large building up of asset bubbles. Accordingly and cyclically, when the bubbles burst, the economy started to cool down. However, this time the trough was not due to a business cyclical downturn; the economy had lost steam due to asset bubble burst. Keynesians argue that by applying large fiscal stimulus under such situations, the government can reinvigorate growth. The Japanese government did apply several fiscal stimulus programs but was unsuccessful in spurring growth or controlling other macroeconomic indicators either. Figure 1 below puts into perspective the state of the Japanese economy during the crisis. It shows the real GDP growth rates for Japan and for the US from 1985 to 2002. Figure 1: Comparison of Real GDP growth in Japan and US from 1985 to 2002 From Figure 1, we see that Japan enjoyed high economic growth from 1985 to 1991 where after the economy was more or less stagnant until 2002 except in 1996 (2.6%) and in 2000 (2.9%) where the economic growth was >2% but still well below that of
...Download file to see next pagesRead More
Cite this document
(“Is the fiscal stimulus worked during the Japanese Stagnation in early Research Paper”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1433170-is-the-fiscal-stimulus-worked-during-the-japanese
(Is the Fiscal Stimulus Worked During the Japanese Stagnation in Early Research Paper)
“Is the Fiscal Stimulus Worked During the Japanese Stagnation in Early Research Paper”, n.d. https://studentshare.org/macro-microeconomics/1433170-is-the-fiscal-stimulus-worked-during-the-japanese.
Investigators have claimed that more than half of the global capital which was being pooled in from one end of the corner to another by the implication of financial products, have wiped out. There were a couple of factors that backed up the crisis including the low credit history borrowers who applied for subprime loans etc (Broadley).
The “war” part of the name comes from the conflicts expressed through arms races, sports rivalry, military coalitions, espionage and propaganda. The end date of The Cold War, 1991, refers to the end of the Soviet Union, rather than any particular end of this quasi-stalemate warfare
The American Recovery and Reinvestment Bill was the first essential step by the government to produce and preserve three to four million jobs, start up the economy, and start transforming the economy for the 21st century with $787.2 billion in economic improvement tax cuts and directed priority investments.
However, the scenario has started to change completely from 1985 onwards. Japan has started to undergo a severe economic crisis from 1985 onwards. Growth in all sectors has been collapsed and deflation started to embrace Japan as a result of this crisis. According to Takeo Hoshi and Anil K Kashyap (2004), Japan’s Financial Crisis and Economic Stagnation may cost the “taxpayers is at least 20 percent of Japan’s GDP.
This internment was so unjust that the Japanese American who lived on the West Coast were interned while among those in Hawaii, who outnumbered the former by 40,000 Japanese Americans, only 1800 were interned. More than fifty percent of interned were citizens of America.
However, this lukewarm boost to the national productivity was not matched by similar alterations in the unemployment rate. The unemployment rate that stood at 9.5 percent in June 2009 increased to 10 percent by November (United States Department of Labor: Online).
Americans and hence people in power evoked interest to remove all those of Japanese descent living in the US citing security and military reasons (Exploring the Japanese American internment; Japanese Internment; Historical Overview; World War II). Though the reports presented
It is recognized as the deadliest conflict in human history because it claimed more than 50 million fatalities and resulted in the destruction of property worth billions of dollars. It involved the world’s great powers where countries formed two opposing
ted increase in e Commerce and electronic banking crimes have also become rampant in the virtual world Thus most of the police organizations in the world have their separate units such as cyber cells to deal with the problem The prevailing situation in most of the
The mortgage loans also had a major role in development especially as they represent about one-third of total loans allowed. At present, the house prices are at their all-time high and have been rising to significant extent in the last few years. Banks have also allowed for credits on housing development, even without assessing risks involved.
40 Pages(10000 words)Dissertation
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Research Paper on topic Is the fiscal stimulus worked during the Japanese Stagnation in early 1990 crisis for FREE!