http://www.bbc.co.uk/news/business-17008164
The article presents a government activities through monetary policies: the Bank of Japan keeps the discount rate at historically low - 0 to .1% in order to maximize the money supply. As the money supply increases, the government expects to stimulate the market as banks are more likely to loan out to businesses, thus stabilizing the long depressed Japanese economy. However, the article points out that BoJ's options are limited since the money supply is at its pick level already and there's no more room for adjustment for the government bank.
This article also shows how the Japanese economy is reliance on other economies both from the supply side and from the demand side. Their economy is disrupted by the shortage of food supply from Thailand while their exporting is hurt by debt-crisis in Europe, the slowing growth of Indian and Chinese economy and the slow recovery of the U.S. economy.
The article presents a government activities through monetary policies: the Bank of Japan keeps the discount rate at historically low - 0 to .1% in order to maximize the money supply. As the money supply increases, the government expects to stimulate the market as banks are more likely to loan out to businesses, thus stabilizing the long depressed Japanese economy. However, the article points out that BoJ's options are limited since the money supply is at its pick level already and there's no more room for adjustment for the government bank.
This article also shows how the Japanese economy is reliance on other economies both from the supply side and from the demand side. Their economy is disrupted by the shortage of food supply from Thailand while their exporting is hurt by debt-crisis in Europe, the slowing growth of Indian and Chinese economy and the slow recovery of the U.S. economy.
2 comments:
The Japanese Economy is a classical example of liquidity trap. The growth rate of Japan has been very slow for the recent 10+ years, and once a liquidity trap happen, as people are expecting deflation in the future, simply lowering the interest rate and injecting cash into the economy will have minimal effect. Moreover, as the Japanese political leaders tend to be conservative and do not have effective methods to save the economy, Japan will be facing a slow economy in the visible future.
The Japanese trying to stabilize their through lowering discount rates could have been a good ideal, if it wasn’t a desperation move. By relying a heavily on exporting and foreign markets success, they have left their economy susceptible to being weakening when these markets slow down. It’s a little late for strengthening their economy domestically. By strengthen their economy domestically earlier; they would have been prepared for the decline in exports and able to perform enough transactions domestically to fuel their economy.
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