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JapanSick Economy
Presented by:
Cheong Jia Ni
Ho Chin Sian
Lim Pei Shan
Pan Hui Hui
Xiao Jun Hui
Contents
Introduction
The reasons why Japan is a sick
economy
Will the people be affected
Possible Cures for Japan’s economy
Why Japan is a sick
economy?
Prices of land for commercial use and
residential use have dropped since 1991

•
•
Decrease of 70% for commercial use
Decrease of 45% for residential use
Interest rates to fall to a historically low
level.

•
•
•
•
The monetary policy in Japan was the traditional
type of interest rate inducement before 1990s,
The Bank of Japan has adapted a policy to
increase money supply.
In 1995, the rediscount rate was stepped down
and attained 0.5%.
From 1999 to 2000, Japan has adopted the zerointerest policy.
Why Japan is a sick economy?

Economic growth rate declined
• Declined in steps since the early 1970s, from 10.4
percent in the 1960s to 5.2 percent in the 1970s,
to 3.8 percent in the 1980s, and to 1.7 in the 1990s.
(Figure)

Change in work attitude
• 22% in 1975
16% in 1992
(Next)
Will the people be affected?
Yes, to a large extent…
 Economy keeps shrinking
 Consumer spending decreased
 Interest rate
 Stock market fell
 Unemployment
 Government run out of money
Will the people be affected?
No, because Japanese…
did not invest in stock market
did not invest in real estate
properties
do not risk losing their jobs
have more money and time to travel
around the world
Possible Cures for Japan’s
economy
Changes in corporate taxation
Promotion of new industries

Changes corporate pension systems

Changes in commercial law
Possible Cures for Japan’s
economy
Inflation
Receiving much media attention as a
miracle cure to drag Japan out of
deflation
Expectations for inflation increase,
nominal interest rates rise, increasing
the cost of issuing new bonds.
Bring positive effects by reducing the
burden of government debts
Government will be able to achieve
the same debt reduction effect as a tax
hike without using the term "tax
hike" (and even without bothering to
collect taxes).
Possible Cures for Japan’s
economy
Inflation: Problems
Labour costs are bound to go up, the jobless rate is expected to
increase
A decrease in the value of money due to inflation will lower
pensioners' living standards
The price of outstanding bonds will fall
Unclear who is going to take responsibility if inflation becomes
uncontrollable
Savers faced with negative real interest rates, are likely to plunk their
cash overseas , causing a slowdown in monetary growth and credit
creation.
Conclusion