Building on a Japanese Crisis

April 1, 2010 § 3 Comments

There are five major ideas presented in this article, as to why the Japanese faces great challenges in their economy.

1. Lack of confidence being an understatement. Japan’s self-deprecating analysis, with considerable charm, politicians, bankers, and academics will layout for the reasons to Japan’s “lost decade” since 1992ーwhen the great economic bubble bursted. Due to all these factors, the Japanese lost self-confidence in bringing back the economy to where it was before.”Parliamentarians’ offices are stuffed with paper and campaign mementoes but hardly any screens; universities lack rudimentary technical equipment; and entrepreneurial conversation is absent”.

2. Large amount of debt in government. Central and local government debts totals make up nearly 180% of the nation’s GDP. This problem is merely due to the aging population; by the year 2030, a third of the population will be 65 years or older. Therefore, this will increase the healthcare costs and reduce the tax revenues. The article suggests, that “it begins with the well-known point that 95 per cent of government debt is financed by Japanese savings, making the Government largely independent of the markets”. Yes, the savings rate will decline as the population will too, but if the Japanese government does no think of measures for highly-educated women wanting to enter workforces, the numbers of babies will solemnly decrease. “The shrinking population, and a recent law weakening tenants’ rights, will free up housing, allowing younger people to get homes sooner. That will help to boost consumption. Meanwhile, the region’s growth will lift exports”.

3. Improper budget-making. The new Government seems unable to trim the deficit in the Budget making its way through parliament, given corruption scandals and a rash of expensive populist promises before the July elections for the upper house. And I will not agree about paying high taxes (if they decide to do so) because there useless bridge-making plans, or any other extravagances from past occurrences

4. Lack of risk-taking business culture. “The technical confidence — taken for granted, as a kind of literacy — among those buying electronic components off market stalls is impressive”. It is a national character for the Japanese to be more ‘less-outgoing’ because the great fear of losing their occupations, and preferability of sustainability.

5. Absence of urgency acting against deflation. “Falling prices make life comfortable for those in work but choke off desire to spend”. The Bank of Japan has attempted in fixing this problem with various modifications, however, still needs more work. One reason of deflation is because Japan’s heavy reliance in imported goods. Since foreign countries outside of Japan has lower wages and fast growth, Japan imports consumable goods at a very cheap price. Thus, the prices of these goods lead to diminishing. “Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary”.

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§ 3 Responses to Building on a Japanese Crisis

  • kanamaeeconblog says:

    I agree with all your reasons and your post is so detailed!
    Which do you think is the #1 major cause for Japanese crisis?
    Great Job! xD

  • julieeconblog says:

    Natsuki:) I agree on all of your five points! I think the debt that government has is a big challenge a coutry might come acress. The Korean government has debt from other coutries, which has been stacking up from decades ago. Great post!

  • […] Response to Building on a Japanese Crisis April 1, 2010 at 10:08 AM […]

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