Cause Of Weak Growth In Japan

Japan is currently facing three main challenges in the economy. Weak growth, Deflation and Public finances.

1. Weak growth

Over the past two decades, weak growth was caused in part, to structural problem. After 1990s, Japan’s GDP growth has been sluggish compared to other major world economies. The cause of the weak growth were a rapidly ageing population, protected, uncompetitive sectors of economy such as health care, agriculture, energy and segmentation the labour workforce. The increasing segmentation of the labour market between regular workers with generous rights and non-regular workers with fewer rights who tend to be part-time or fixed-term contracts on other.

2. Deflation

Deflation has become entrenched since the late 1990s has

Japan government is spending more to boost the Japanese economy. The fiscal policy focused particularly on reconstruction efforts such as building brides, tunnel and earthquake- resistant roads. The government invest 10.3 trillion yen to these infrastructure projects. However Japanese government cannot continues throwing money at the economy without finding a new source of income. Abe announced that rising the corporate tax rates is necessary to step to boost the global competitiveness of corporate Japan and make the country attractive to foreign investment. He increase the consumption tax from 5 percent to 8 percent. The wage surprise stands out, because only when the long-missing link between corporate profitability and wages is restored will investment in houses, cars, and other durables, and household consumption in general, finally rid Japan of its deflation and put its economy on a sustained growth path. Spending is either for consumption, or accumulation of foreign wealth national income is disposed as either consumption, investment, or purchase of foreign assets.it is traded foe goods and services used up by households in the immediate period (consumption) or it is used to accumulate machines, tools, and other durables that will add to the economy’s capacity to produce goods and services in the future periods (investment). Abenomics has lowered real wages as prices has risen more than nominal wages, but the medium-run success of a higher inflation may depend on this. Higher real wages would increase consumer confidence and reduce uncertainty about Japan’s commitment to higher inflation. Both of the policy, monetary and fiscal have effected on aggregate demand and aggregate