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The Current State of the Japanese Economy and Remedies

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  • Naoyuki Yoshino

    (Professor of Economics Keio University 2-15-45 Mita Minato-ku Tokyo 108-8345 Japan,)

  • Eisuke Sakakibara

    (Professor Keio University Tokyo, Japan Former Vice Minister of Finance for International Affairs, Japan)

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    Abstract

    Japan has reached the limits of conventional macroeconomic policies. Lowering interest rates will not stimulate the economy because widespread excess capacity has made private investment insensitive to interest rate changes. Increasing government expenditure in the usual way will have small effects because it will take the form of unproductive investment in the rural areas. Cutting taxes will not increase consumption because workers are concerned about job security and future pension and medical benefits. Expanding the monetary base will not induce banks to increase investment loans because the proportion of nonper-forming loans in their portfolios is growing because of the prolonged economic stagnation. In order for sustained economic recovery to occur in Japan, the government must change the makeup and regional allocation of public investments, resolve the problem of nonperforming loans in the banking system, improve the corporate governance and operations of the banks, and strengthen the international competitiveness of domestically oriented companies in the agriculture, construction, and service industries. Copyright (c) 2002 Center for International Development at Harvard University and Massachusetts Institute of Technology.

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    Bibliographic Info

    Article provided by MIT Press in its journal Asian Economic Papers.

    Volume (Year): 1 (2002)
    Issue (Month): 2 ()
    Pages: 110-126

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    Handle: RePEc:tpr:asiaec:v:1:y:2002:i:2:p:110-126

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    Cited by:
    1. Hossain, Monzur, 2005. "Financial Deregulation and Crisis:An ‘Agency-conflict’ Case of Japan," MPRA Paper 24856, University Library of Munich, Germany.
    2. Arne Bigsten, 2005. "Can Japan Make a Comeback?," The World Economy, Wiley Blackwell, vol. 28(4), pages 595-606, 04.
    3. Anita Tuladhar & Markus Bruckner, 2010. "Public Investment As a Fiscal Stimulus," IMF Working Papers 10/110, International Monetary Fund.
    4. Alan Ahearne & Joseph Gagnon & Jane Haltmaier & Steve Kamin ... [et al.]., 2002. "Preventing deflation: lessons from Japan's experience in the 1990s," International Finance Discussion Papers 729, Board of Governors of the Federal Reserve System (U.S.).
    5. Hossain Monzur & Farhana Rafiq, 2012. "Asset Price Bubble and Banks: The Case of Japan," Working Papers id:5002, eSocialSciences.
    6. Hossain, Monzur, 2004. "Did The Asset Price Bubble Matter For Japanese Banking Crisis In The 1990s?," MPRA Paper 24738, University Library of Munich, Germany.
    7. Hossain, Monzur, 2005. "Financial Deregulations, Conflict of Interest and Banking Crisis in Japan: A Decision-theoretic-GARCH Approach to Analyze the Management Behavior," MPRA Paper 24858, University Library of Munich, Germany.

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