Tying Up the Loose Ends - A Conclusion

A wise person once said, "All good things must come to an end". Sadly, this will be my last post on the economy of Japan. Macroeconomics is almost finished. Throughout this string of blogs, I've reported on a variety of different subjects from agriculture to anime, monetary policy to cost of living in Japan. Each and everything tied to their economics. However, there are a couple of loose strings I would like to tie up.

Last Macroeconomics class we discussed different economical theories. I've decided to try and interpret what kind of economical policy Japan follows from what I have learned. In a way, the Japanese economy is similar to Keynesianism . Keynesianism states that government intervention is necessary in an economy. The government intervened when deflation is at its height in Japan. The Bank of Japan and the government both thought of a plan to get Japan back on it's feet.

On a recent note, Japanese Financial Minister Kan believes that Japan's economy is having a better chance of overcoming difficulties. However, even though the global economy is showing signs of recovery, the Japanese are still being cautious about what they do, so that they don't put their country in financial ruin for the long-term. Kan wants the stimulus package to go through and have banks give out better loans so it could stimulate money growth. Kan also wants the Japanese economists to learn what went wrong that caused this downfall in their economy so that they can prevent it later.

In my opinion, it's probably going to take a while for the Japanese economy to get back on its feet. However, the changes that they are putting in place is a good thing because if things can't change, they fall apart. Even though this crisis is at it's turning point, there is still a lot of work ahead for Japan. I only hope that they can learn enough from what happened to make sure it never happens again.

Source:

http://abcnews.go.com/Business/wireStory?id=10467374

Japan's Economy Coming Up From The Ground

They say that April showers bring May flowers. Well, this month of April, it looks as if Japan's economy is blooming from the rains of deflation. The Japanese government changed Japan economy's status from "improving" to "picking up". The past several months, Japan has been in an economy crisis with the high deflation and all. However, Japan is still cautious about being optimistic about the economy. It shows that the stimulus packages that have been dispersed are improving business and consumer sentiment. It looks as if there is a bright future for Japan's economy, and the flower is starting to bloom again. However, instead of using stimulus packages, where they could suffer inflation, they are just going to use reserves to combat deflaton. Japan has set aside one trillion yen in its budget in order to combat the falling economy. However, from this point in time, deflation is decreasing, but the Japanese officials are saying that it's going to take a long time still to be completely rid of deflation. I discussed about the Bank of Japan easing monetary policy in a few posts back, and it looks as if the Bank of Japan will ease monetary policy further. In my opinion, it looks like Japan is doing whatever it takes to improve the current situation they are in without having dire consequences. Even though it's going to take a long time to combat deflation, I have faith in Japan's determination to make their economy back to normal.

Sources

http://online.wsj.com/article/BT-CO-20100416-704253.html?mod=WSJ_latestheadlines

Is the economy of Japan recovering?

Earlier today, Reuters reports that Governor Shirakawa sees signs of "sustainable recovery. As you all know, Japan has been suffering a serious deflation these past several months. Also, I mentioned a few weeks back that Japan was looking to push monetary policy by creating more money for people to spend. Shirakawa thinks that pushing monetary policy is a bad thing right now because he sees the economy slowly getting better. The people of Japan were afraid of a "double-dip" economy deflation, meaning that the deflation was going to happen again. However, Shirakawa says that capital spending is increasing and corporate profits are increasing, so there is no need to pump money in the economy and suffer through inflation. Japan has pulled out of a recession last year just barely. Right now, Japan has a growing fiscal deficit, meaning that they are losing money to spend all the time. It has been said that Japan's debts are right now twice the size of the economy.

In my opinion, I agree with Governor Shirakawa. When I took economics my senior year of high school, one of the many things I learned about economics is that the whole economy goes through peaks and troughs. There is a cycle that will kill itself and then repair itself. Things have to change in order to grow. The economy will slowly get better naturally than if we pump more money into the economy. Then again, I'm only a student, but it seems more logical to just let it be if it's going to come back naturally.

Sources

Kihara, L (2010). BOJ chief sees signs of sustainable economic recovery. Reuters. Accessed on April 7, 2010 from http://www.reuters.com/article/idUSTOE63604Y20100407