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Japan's new stimulus package which plans to double the monetary base over the next two years should help greatly to increase exports and decrease deflation, but Japan faces some other problems. While Japan hopes to end deflation there is large corporate reluctance to increase pay and bonuses, which could act against the reform. Also fiscal stimulus and monetary easing might not be enough to pull Japan out of over a decade of deflation. A national growth strategy in the form of deregulation and government-led industrial policy would certainly help. Shinzo Abe also has to compromise with a less-liberal parliament. If his Liberal Democratic Party takes over parliament it might be interesting to see what policies they can approve.
1 comment:
I really doubt the effectiveness of Japan's policies in this area. It seems they believe devaluing their currency will and thus making their exports cheaper will help increase demand for their goods. However, with many of the top buyers of Japan's goods, like the Eurozone, still in recession, I do not think their exports will increase that much.
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