Japan- Sick Economy

Presented by:

Cheong Jia Ni

Ho Chin Sian

Lim Pei Shan

Pan Hui Hui

Xiao Jun Hui

ContentsContents

The reasons why Japan is a sick The reasons why Japan is a sick economyeconomy

Will the people be affectedWill the people be affected

Possible Cures for Japan’s economyPossible Cures for Japan’s economy

Why Japan is a sick Why Japan is a sick economy?economy?

Prices of land for commercial use and Prices of land for commercial use and residential use have dropped since 1991residential use have dropped since 1991

• Decrease of 70% for commercial useDecrease of 70% for commercial use• Decrease of 45% for residential use Decrease of 45% for residential use

Interest rates to fall to a historically low Interest rates to fall to a historically low level.level.

• The monetary policy in Japan was the traditional type The monetary policy in Japan was the traditional type of interest rate inducementof interest rate inducement

• The Bank of Japan has adapted a policy to increase The Bank of Japan has adapted a policy to increase money supply.money supply.

• In 1995, the rediscount rate was stepped down and In 1995, the rediscount rate was stepped down and attained 0.5%. attained 0.5%.

• From 1999 to 2000, Japan has adopted the zero-From 1999 to 2000, Japan has adopted the zero-interest policy.interest policy.

Why Japan is a sick economy?Why Japan is a sick economy? Economic growth rate Economic growth rate declineddeclined

• Declined in steps since the early 1970s, from Declined in steps since the early 1970s, from 10.4 percent in the 1960s to 5.2 percent in 10.4 percent in the 1960s to 5.2 percent in the 1970s, the 1970s, to 3.8 percent in the 1980s, and to to 3.8 percent in the 1980s, and to 1.7 in the 1990s.1.7 in the 1990s.

(Figure(Figure))

Changes in work attitudeChanges in work attitude• Post-war generations of Japanese is better educated Post-war generations of Japanese is better educated

and used to prosperity.So they have a different and used to prosperity.So they have a different attitudes towards work.attitudes towards work.

(Next)(Next)

Will the people be affected?Will the people be affected?

Yes, to a large extent…Yes, to a large extent… Economy keeps shrinkingEconomy keeps shrinking Consumer spending decreasedConsumer spending decreased Interest rateInterest rate Stock market fell Stock market fell UnemploymentUnemployment Government run out of moneyGovernment run out of money

No, because Japanese…No, because Japanese…did not invest in stock marketdid not invest in stock marketdid not invest in real estate did not invest in real estate propertiespropertiesdo not risk losing their jobsdo not risk losing their jobshave more money and time to travel have more money and time to travel around the worldaround the world

Will the people be affected?

Possible Cures for Japan’s Possible Cures for Japan’s economyeconomy

Changes in corporate taxationChanges in corporate taxation

Promotion of new industriesPromotion of new industries

Changes corporate pension systemsChanges corporate pension systems

Changes in commercial lawChanges in commercial law

Possible Cures for Japan’s Possible Cures for Japan’s economyeconomy

InflationInflationReceiving much media attention as a Receiving much media attention as a miracle cure to drag Japan out of miracle cure to drag Japan out of deflation deflation Expectations for inflation increase, Expectations for inflation increase, nominal interest rates rise, increasing nominal interest rates rise, increasing the cost of issuing new bonds.the cost of issuing new bonds.Bring positive effects by reducing the Bring positive effects by reducing the burden of government debts burden of government debts Government will be able to achieve Government will be able to achieve the same debt reduction effect as a tax the same debt reduction effect as a tax hike without using the term "tax hike without using the term "tax hike" (and even without bothering to hike" (and even without bothering to collect taxes).collect taxes).

Possible Cures for Japan’s Possible Cures for Japan’s economyeconomy

Inflation: ProblemsInflation: ProblemsLabour costs are bound to go up, the jobless rate is expected to Labour costs are bound to go up, the jobless rate is expected to increase increase

A decrease in the value of money due to inflation will lower A decrease in the value of money due to inflation will lower pensioners' living standards pensioners' living standards

The price of outstanding bonds will fall The price of outstanding bonds will fall

Unclear who is going to take responsibility if inflation becomes Unclear who is going to take responsibility if inflation becomes uncontrollable uncontrollable

Savers faced with negative real interest rates, are likely to plunk their Savers faced with negative real interest rates, are likely to plunk their cash overseas , causing a slowdown in monetary growth and credit cash overseas , causing a slowdown in monetary growth and credit creation.creation.

ConclusionConclusion