On Alternatives to Aggressive Demand Policies to Revitalize the Japanese Economy
AbstractThis paper claims that a scarcity of profitable private investment opportunities starting in the early 1990s or even earlier is a fundamental cause of Japan's prolonged economic stagnation during the 1990s and early 2000s. It presents evidence that the economy has been largely at a private equilibrium (i.e., at its optimum for the physical and human capital Japan has inherited from the past), rather than in a disequilibrium constrained by the binding zero bound of nominal interest rates and/or widespread liquidity constraints. Consequently, aggressive aggregate demand policies, particularly zero nominal interest rates coupled with aggressive quantity easing, are ineffective means for escaping from Japan's current economic stagnation and deflation. Reflation policies based on money financing alone are unlikely to solve the problem because of their strong distributional side effects and limited effects on employment and output. The paper concludes that although exchange rate policies are more promising than other aggregate demand policies, their political feasibility is questionable, and aggregate demand policies are unlikely to be effective without new structural initiatives to increase investment. Although the Japanese economy is at a private equilibrium, it is far from its social optimum. Socially desirable investment opportunities have not been exploited fully in Japan, mainly because most of them are unprofitable for the private sector. Socially oriented investment trusts are proposed as one way to encourage such investment. Copyright (c) 2004 The Earth Institute at Columbia University and the Massachusetts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by MIT Press in its journal Asian Economic Papers.
Volume (Year): 2 (2003)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Atsuo Utaka, 2014. "Consumer Confidence and the Japanese Economy -Comparison of Pre- and Post-Bubble Period-," Economics Bulletin, AccessEcon, vol. 34(2), pages 1165-1173.
- Henry Hongbo Jin & Olivia S. Mitchell & John Piggott, 2005.
"Socially Responsible Investment in Japanese Pensions,"
NBER Working Papers
11747, National Bureau of Economic Research, Inc.
- Jin, Henry Hongbo & Mitchell, Olivia S. & Piggott, John, 2006. "Socially responsible investment in Japanese pensions," Pacific-Basin Finance Journal, Elsevier, vol. 14(5), pages 427-438, November.
- Post, Erik, 2006. "Foreign exchange market interventions as monetary policy," Working Paper Series 2006:21, Uppsala University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.