...Abenomics is the name given to a suite of measures introduced by Japanese prime minister Shinzo Abe after his December 2012 re-election to the post he last held in 2007. Abe has focused his second term on turning around his country's moribund economy. The economic policies that Abe supports include an aggressive set of monetary, fiscal, and structural reforms geared toward spurring inflation and pulling Japan out of its decades-long deflationary slump. The broad goal is to boost annual GDP growth, which currently stands at 2 percent, and raise inflation to 2 percent via short-term stimulus spending, monetary easing, and reforms that will boost domestic labor markets and increase trade partnerships. Back in September 2012 before Abenomics took a place, the country was suffering its third recession in four years. The yen was uncomfortably strong (trading at 78 to the dollar), the stock market was unsurprisingly weak (the TOPIX index was about 743), and consumer prices (excluding food and energy) were falling for the 45th month in a row. To help us understand better why some changes were necessary let’s look closer on Japanese economic history. Japan's chronic deflation has resulted in weak demand, despite interest rates floating at 0 percent for years. Over the past two decades, the Japanese government has spent trillions of dollars in various bids to lift its economy out of a severe downturn catalyzed by the bursting of a real estate bubble in the late 1980s. The bursting of...
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...Introduction: In the attached news article, Japan’s economy has shown signs of a modest recovery in early 2015. Since the introduction of the economic stimulus package at end of 2012, (also known as the “The three arrows of Abenomics” which was meant to steer Japan out of two decades of deflation), its economy experienced a short recovery but fell short of the central bank’s target of 2 % inflation rate. The unexpected brief recession came about after the government introduced a sales hike in April 2014. The early 2015 economic data has shown signs of recovery with bigger Japanese companies announcing wage hikes but other indicators like the production manufacturing indicators (PMI) and households spending remain weak and that may mitigate its recovery. In the following discussion, we will discuss briefly the economic background of the Japanese economy after the war II and how it went into two decades of deflation. Further discussions will also focus on the economic stimulus package implemented by the Abe Administration (three arrows) and its effects on the economy. Brief background of Japanese economy from 1960 to 1990 and its “lost decades” According to an article by Sundar, A (2013) and Khan (2003), Japan began rebuilding its infrastructure and economy by investing heavily in capital equipment (30% of GDP) and began exporting its products. This resulted in huge trade surplus with the US. Khan (2003) then reported that the Japanese government signed the Plaza Accord...
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...Japan economy remains mired in recession despite attempts by Government to stimulate economic growth over years. The Gross Domestic Product (GDP) growth is not as great as it was before asset-price bubble. The monetary measures implemented by Japan new government to solves two-decades of sluggish growth has been brought up to G20 meeting at Moscow on February 2013, to determine on its compatibility with G20 agreement. It has been endorsed by G20 communities for its important role in global economy. Economist anticipated recovery would be slow as deflation has raged in Japan for near to two-decades. This paper examines the deflation issues in Japan; to shed some lights on the causes of deflation and several issues arises from prolonged deflation. Lastly, new stimulus package to expand economy will be highlighted. The effectiveness and potential side effects of policy will be discussed. Deflation, which was not a serious monetary issue has entrenched and gained attention globally for its prolonged effects in Japan. (Bernanke 2003). According to Blink and Dorton (2007), deflation occurs when average price level has generally declined. Deflation refers to situation where inflation rate falls below zero zones. It is categorized into two board explanation. “Good” deflation finds it source from improvement on supply side of economy. As figure (1) refers, increased Aggregate Supply (AS) will increase the real output and leads to decline in price level. “Bad” deflation results from...
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...Abraham Ko Economics 332 October 22, 2014 ABENOMICS Japan, as a country, has been the prime example of what most economists refer to as the East Asian Miracle. A small island country centered on isolationist policies during the early 19th century, Japan first opened its doors to economic world trade with the arrival of Commodore Perry and his “Black Ships.”(US Navy Museum 2014) Although small in size, and low in resources, Japan saw the power and might of its Western contemporaries and aimed to follow in their footsteps. Near the end of the 20th Century, Japan was officially recognized as an economic superpower throughout the world. However, growth never lasts forever and by the 1990s, Japan’s economy had come to a grinding halt due to a massive collapse in both the real estate and stock markets of the Japanese economy and remains in a recession that has lasted till now. As Japan looked to face another year of stagnant growth of the economy, Japan’s Prime Minister, Shinzo Abe, decided enough was enough. With the assistance of the new governor of the Bank of Japan, Shinzo Abe embarked on a radical economic plan that focused on three arrows of design. The arrows depict the strategy of Shinzo Abe’s “Abenomics” program in which it focuses on fiscal stimulus, monetary easing, and structural reforms. (International Monetary Fund 2013) It is almost near the two year mark since the implementation of Shinzo Abe’s “Abenomics” program has begun. Although typically, economic effects...
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...Japan’s tough economic development of the 1980s ended at the start of the 1990s. At the end of 1980s, irregularities inside the Japanese economic organization had qualified a hypothetical asset price bubble of massive scale by Japanese enterprises, banks and securities corporations. The mixture of extremely high land prices and low interest rates temporarily caused sharp liquidity of the market. This led to enormous borrowing and strong investment mainly in domestic and global stocks and securities. Realizing that this bubble was unsupportable, the Finance Ministry of JAPAN precisely increased interest rates in late 1980’s. This severe course of action metaphorically bursted the bubble, and the JSE (Japan stock exchange) market collided. A debt crisis trailed and the Japanese banks and insurances were now burdened with uncollectable bills, uncollectable loans and had to write off many debts as bad debts. The financial associations were bailed out from the government, credits from the reserve bank or known as central bank and the ability to delay the acknowledgement of losses, eventually turning them into the banks whose net worth is less than or so called Zombie banks. Zombie banks are considered to be one of the important causes for the Japan economic stagnation. Michael Schuman ( Asia business correspondent for Time Magazine ) said that Japan's economy would not have started to improve until this practice had terminated, he also indicated that these banks kept inserting more...
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...the failure to bring women into work. According to this article Women’s have the greatest potential, and allowing them to demonstrate their full abilities is the core for Japans growth strategy. Prime Minister Shinzo Abe has brought the issue to the forefront of his economic-growth policy known as "Abenomics," proclaiming a goal to fill 30% of leadership positions in Japan with women by 2020. Major issue: Female Labor shortage is becoming an acute problem in Japan. Labor intensive industries are increasingly unable to fill their vacancies due to which Japan is suffering from economic stagnation. Or Japan suffers from one of the lowest rates of female workforce participation in the developed world. Minor issues: * Lack of childcare facilities, * Badly developed career support. * The country also suffers one of the lowest birthrates in the developed world. * A culture of Gender discrimination which results in many women remaining at home. * Women quit their jobs, they are not career oriented * Major Objective: According to this article the ultimate goal is to enhance Japan robust economy through economic-growth policy known as "Abenomics," proclaiming a goal to fill 30% of leadership positions in Japan with women by 2020 and increases the number of womens in Japanese work force. Or Enhance Japanese economy through employing more women and alleviating them to leadership positions as well. (sir ne kaha tha short hona chaye objective) ...
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...currently stands at about 240% of the GDP of the country. This period of low consumption and investments led Japan into a state of deflation which led to a catastrophic fall in the future prospects and thus the investments in the economy. The BoJ and the government allowed the currency to depreciate with respect to the dollar to boost export income and thereby lead to a current account surplus but attempts failed due to lower export volumes owing to the low business investments. The current target for the economy is to reach a stage of 2% real GDP growth with a moderate 2% inflation rate. The targets are slowly being reached but owing to the huge debt and the availability of easy money, the prospects of the economy are somehow shaky. Abenomics The term refers to the economic policies of the Japanese Prime Minister Shinzo Abe to revive the Japanese economy to a period of economic growth and stability. Abe followed a three pronged strategy for revival of monetary easing, timely and massive fiscal spending and now the economic reforms. The key to the solution lies in the careful...
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...buy dollar at the highest exchange rate and sold these dollar for Yen at the lowest exchange rate, he would obtain 1,081,714 Yen at the end, whose profit was much higher than depositing in the bank. Therefore, the fluctuation between JPY and USD made the exchange rate hard to predict. In addition, the percentage of change in exchange rate was – 0.72% during this period. It indicated that JPY had depreciated 0.72% against USD from 1/1/2015 to 31/10/2015. Notably, JPY suffered depreciation against USD beginning form 2012 and it depreciated almost 30% against USD in the whole year in 2012. In this study, we think that easy money policy is one of the major reason which caused depreciation of Japanese Yen during these years. Since 2012, “Abenomics” is used to stimulate Japanese economy development. According to Financial Times...
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...[pic] TABLE OF CONTENTS EXECUTIVE SUMMARY 4 INTRODUCTION 5 KONGO GUMI ENVIRONMENT 7 Feudal Japan 8 The Restoration of Edo 8 The Meiji Restoration 9 World War 1 12 The Mid War Period 13 World War 2 15 The Occupation of Japan and Post War Reconstruction 16 The Economic Miracle 17 The Lost Decade 18 Global Financial Crisis 19 Natural Disasters 20 Abenomics 21 STRATEGIES KONGO GUMI USED TO SURVIVE TURBULENCE 23 Kongo Gumi in the 20th Century 23 Meiji restoration 23 The Mid War Period 24 World war 11 24 KONGO GUMI WOULD HAVE SURVIVED IF: 25 WOULD KONGO GUMI HAVE SURVIVED IF IT MADE IT THROUGH TO THE ABENOMICS ERA? 26 LESSONS FROM KONGO GUMI 27 CONCLUSION 28 REFERENCES 31 Appendix 1 – Infographic of Japan’s timeline EXECUTIVE SUMMARY Kongo Gumi was a success as it operated in a stable industry. The belief system has survived for thousands of years and has many millions of adherents. With this firm foundation, Kongo had survived some tumultuous times. The temple construction had until recently been a reliable mainstay, contributing 80% of Kongo Gumi's $67.6 million in 2004 revenues. The story of Kongo Gumi suggests that firms should blend elements of conservatism and flexibility. This means that firms should stay in the same business for more than a millennium and...
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...Devaluation in modern monetary policy is a reduction in the value of money with a respect to those goods, services or other monetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. There many reasons for devaluation, and but most have severe consequences that do more harm than good. One of the main reasons a country devalues its currency is to increase its ability to bring in production from the outside and boost its own labor and development. When outside currencies are much stronger, a country can attract international business with cheaper production and labor costs by having a lower valued currency. Alternatively, a country may want to recover its currency from overseas holders. By devaluing the currency it becomes worth less and cheaper to buy back. They country can then re-inflate the value again over time to bring it back to its original state, however it’s no longer sitting overseas. Finally, a country may want to devalue its currency to pay off international debt. If its original loans were made in the same currency, the country could devalue the monetary value by printing more to then pay off the loan faster. This approach gets the borrow The fastest way to devalue a currency is through inflation. When inflation occurs, it takes more currency...
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...If policymakers increase taxes too soon, or if they read the recovery prematurely, they could put the still-tentative U.S. economic recovery in real danger, Goto said. “It’s difficult to measure whether this economic recovery has legs or not,” she said. “In hindsight, the BOJ had misread a lot of the performance of the Japanese economy, and had toyed with the idea of ending that gush of money. What Abenomics has been able to do is to turn back on the spigot,” she said, referring to the current Japanese Prime Minister Shinzo Abe’s plan to breathe life back into Japan. “Japan should have been doing that a lot earlier, so that a comeback could have been easier,” Goto added. “We can learn from that." 2. You can’t divorce financial markets from ‘Main Street’s challenges. Consider what has happened in Japan in recent months. After two decades of subpar performance, the stock market there staged a sharp rally last year, tacking on gains of about 50 percent in roughly 13 months. Japanese stocks took off because of an aggressive round of new easing that was the first part of Abenomics. But what came next was an increase in the consumption tax in an effort to narrow the government’s vast budget gap. Japan's GDP took a nose dive, plummeting 6.8 percent in an annualized basis in the second quarter of this year. Underscoring that slide was lower corporate capital expenditures, which contracted 1.8 percent between April and June. Goto says the decrease was a sign that the tax move was...
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...Prime Minister Abe strongly appealed to the global media his intention towards reforming Japans current economy and to be released from the long lasting recession that has been tormented the lives of the citizens. In the OECD Ministerial Council Meeting that was held on May 6th, he explained the source of Japans hardship lays within the 20years of deflation. This long lasting deflation has begun since the latter half of the 1990s. Inflation expectations fell, resulting a negative output gap and other factors such as a decline in import prices and a rise in interest rates occurred since then until now. The definite cause for the continuation of deflation is that consumers rejected to pour money in to the economy, saving what little money they had. In order to encourage citizens to put more money in to the market, governments took countermeasures such as handing out a portion of money to each and every family, however this policy ended up being useless. Staring from April, Abe launched one of his “three arrow” policy and raised the consumption tax from 5% to 8% and will eventually rise to a 10% tax rate. Also, there is even a theory that mentions the decrease in the number of children is the direct cause of deflation. Abe wishes to build a new economic order with the EU and at the same time promotes political measures to eliminate tariffs between countries for free trade. He states that by executing free trade by setting up a rule that is fair for all states, we can create a vigorous...
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...Japan: Overview of Economics | Angie Kovachik | BU-501 Economics | | Introduction Japan has had its struggles in the past and even more recent years with economics. Many factors and issues that Japan faces have come into play, therefore affecting their economy. Over the past 70 some years, Japan has however developed into an advanced and rich economy. Japan has a mixed economy that is made up of both private ownership and governmental intervention, including the MITI’s guide of national resources to meet commercial pursuits and the use of keiretsus provide goods and services to end users (Luthans & Doh, 2015). The keiretsu uses a close interlocking structure between manufacturers, suppliers, and distributors. Another characteristic that has helped Japan since the post-World War II era is the guarantee of lifetime employment for a large part of the urban labor force. However, more recently we have seen Japan’s economy slow in growth and corrode because of global factors and the demographic crisis they are experiencing (CIA, 2016). The economy has tumbled into a recession four times since 2008, but did rebound because of government stimulus. The massive earthquake and tsunami that devastated the country in 2011 was hard hitting to Japan in many ways and rippled through the economy that year and the following year. The country saw an upward growth in 2013 due to the Prime Minister, Shinzo Abe’s, “Three Arrows” economic reform. The Three Arrows included monetary...
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...1. US sets preliminary anti dumping duties on steel rebar from Mexico and Turkey Source: www.steelguru.com - Wednesday, 23 Apr 2014 Reuters reported that the US Commerce Department set preliminary duties on millions of dollars worth of imports of steel rebar from Mexico and Turkey after a complaint by US producers about price undercutting by foreign competitors. The department set dumping duties of up to 66.7% on imports from Mexico and duties of up to 2.6% on Turkish imports after American producers alleged companies from the two countries were selling steel rebar, which is used to reinforce concrete, at unfairly low prices. A final decision is due on July 2. The US International Trade Commission and the Commerce Department launched investigations after a petition was filed last year by Nucor Corporation, Commercial Metals Company and other manufacturers. The trade commission found there was reasonable indication the imports are harming local firms. Mr John Ferriola CEO of Nucor said that “Imports from Mexico and Turkey had doubled since 2010 and were having a devastating impact on the industry”. Commerce said that in 2013 imports of steel concrete reinforcing bar from Mexico were valued at an estimated USD 182.1 million and from Turkey at USD 381.3 million. The manufacturers accuse Mexican and Turkish competitors of unfairly undercutting US prices to grab sales and market share, a trade strategy known as dumping. US manufacturers also claimed rebar imports...
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...Question 1 Answer: Money is used in final settlement of a debt and as a ready store of value. Several functions of money are associated with different empirical measures of its supply. Given that most modern economies are government regulated through set monetary policies, the supply of money is broken down into types of money based on how much of an effect monetary policy can have on each. In Australia for example the the Reserve Bank of Australia (RBA) defines the aggregate functions of money into the following categories: M1: currency bank + current deposits from the private non-bank sector; M3: M1 + all other bank deposits of the private non-bank sector; Broad Money: M3 + borrowings from the private sector by Non-Banking Financial Institutions, less the NBFI’s holdings of currency and bank deposits; Money Base: holdings of notes and coins by the private sector plus deposits of banks with the Reserve Bank of Australia (RBA) and other RBA liabilities to the private non-bank sector The different types of money found in most reserve banks are described in the table below. Type of money M0 MB M1 M2 M3 MZM Notes and coins (currency) in circulation (outside Federal Reserve Banks, and the vaults of depository institutions) V V V V V V Notes and coins (currency) in bank vaults V V Federal Reserve Bank credit (minimum reserves and excess reserves) V traveller’s checks of non-bank issuers V V V V demand deposits V V V V other checkable deposits (OCDs), which...
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