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Crisis in Japan and the Way Out: A Counterargument to Pessimistic Views


  • Kunimune, Kozo


This paper focuses on a review of the present state of, and outlook for the Japanese economy. The paper is composed of three parts. The first describes the interrelation between the crisis-ridden East Asian economies and Japan. I argue that Japan did not cause the Asian currency crisis. The second part describes the current state of the Japanese economy after the bubble burst. I also discuss the medium- and long-term challenges that face the Japanese economy. The third part concentrates on the issue of the "liquidity trap" Japan is experiencing. I argue that the yen's exchange rate is more likely to appreciate than depreciate by pumping liquidity into the economy while interest rates cannot be lowered any further, and therefore a "helicopter money" policy is the only way to induce a positive inflation rate and escape from the liquidity trap.

Suggested Citation

  • Kunimune, Kozo, 1999. "Crisis in Japan and the Way Out: A Counterargument to Pessimistic Views," The Developing Economies, Institute of Developing Economies, Japan External Trade Organization(JETRO), vol. 37(4), pages 514-539, December.
  • Handle: RePEc:jet:deveco:v:37:y:1999:i:4:p:514-539

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    References listed on IDEAS

    1. Chen, Tain-Jy, 1992. "Technical Change and Technical Adaptation of Multinational Firms: The Case of Taiwan's Electronics Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 40(4), pages 867-881, July.
    2. Levy, Brian & Kuo, Wen-Jeng, 1991. "The strategic orientations of firms and the performance of Korea and Taiwan in frontier industries: Lessons from comparative case studies of keyboard and personal computer assembly," World Development, Elsevier, vol. 19(4), pages 363-374, April.
    3. Mody, Ashoka, 1990. "Institutions and Dynamic Comparative Advantage: The Electronics Industry in South Korea and Taiwan," Cambridge Journal of Economics, Oxford University Press, vol. 14(3), pages 291-314, September.
    4. Chen, Tain-Jy & Tang, De-Piao, 1986. "The production characteristics of multinational firms and the effects of tax incentives : The Case of Taiwan's Electronics Industry," Journal of Development Economics, Elsevier, vol. 24(1), pages 119-129, November.
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