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

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  • Kunimune, Kozo
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    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.

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    Article provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its journal The Developing Economies = The Developing Economies.

    Volume (Year): 37 (1999)
    Issue (Month): 4 (December)
    Pages: 514-539

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    Handle: RePEc:jet:deveco:v:37:y:1999:i:4:p:514-539
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