Economic Growth In Japan

Introduction

Japan is the third largest economy of the world, and has shown a significant economic growth from 1960 – 1980. The economic growth in Japan paved the way for the country to become a high-wage economy with the significant increase in overall GDP of the nation. However, who would have known that after a success period of economic growth, the Japanese economy would become stagnant and slow down so much so that just to keep the interest rates in to the positive region would prove to be such a huge task that the country still is having a hard time to maintain this positive number. The period from 1991– 2001 is often known as the Lost Decade for Japan, which was caused by massive inflation in the asset prices from 1986 – 1991 due to

However, recent efforts by the BoJ and Abenomics combined together have significantly helped the nation’s economy towards a slightly brighter and a more promising future. The consumers have also played a very critical role in the way the Japanese economy has been progressing. Due to deflation prices initially started to go down, and everything in the market became cheaper and more accessible. However, due to this consumers stopped spending money in the economy in order to see how much further the prices could fall, which disrupted the circulation of money in the overall economy. Since people stopped buying companies were forced to make excess supply of products further cheaper in order to sell them out, since this resulted in cutting back of production, further resulting in tremendous reduction in the wages of the employees leading to an overall less profit made by the companies. This led most of the Japanese companies to do business overseas rather than in Japan due to lack of profits, and lack of foreign investment led the economy to a complete halt.

However, many steps have been taking in the past few years in order to revive the Japanese economy in order to tackle deflation problems face by the country. The following are the notable

The whole economical problem being faced by Japan is that supply is far greater than the demand, which in turn is causing deflation to slowly poison the whole economy. However, Abe promised to address these demographic issues, by allowing immigration in the upcoming years to bolster the consumer market of Japan.

Monetary Policy of Japan 2016

The most important aspect of the monetary policy of Japan is to stabilize the prices in order to encourage the economic activity of the nation. The continuous altering and controlling of the interest rates in Japan has always been the primary feature of the monetary policy implemented by the BoJ in order to have full monetary and currency control, through the open marketing operations being carried out by the BoJ itself.

Price Stability Target

BoJ decided to introduce price stability target in the form of the inflation target that they have promised to meet. The Bank has associated that price stability in the market has been directly linked with the inflation rate, and sees this as a potential way of making the economy move forward since a number of different players within the economy would compete for bringing in diverse and new products within the economy. The inflation rate that BoJ has promised to meet is of 2%, and currently Japan stands on 0.3%, which is still far away from