This http://www.reuters.com/article/2012/12/14/us-japan-election-china-idUSBRE8BD06F20121214” target=”_blank”>Reuter article is a counterpoint to the post I made on the potential effects of Abe’s rise to the Prime Ministerial seat. The popular press and general consensus appears to be that Abe is a hardliner and ardent nationalist, who will be incredibly confrontation with Japan. The risks involved are the future of Sino-Japanese trade, which Japan relies heavily on. Continue reading
http://www.bbc.co.uk/news/business-20722595” target=”_blank”>According to the BBC, Japan’s large manufacturers report worse sentiments as a result of the long-time problems of strong yen, slowed export demand, and weak domestic consumption, with no end in sight. Furthermore, for the last two quarters, Japan’s economy reported a recession in GDP. Continue reading
The Japanese conservative party which was ousted just three years ago for the first time in modern Japanese history, is about to comfortably win the recently called. This http://www.guardian.co.uk/world/2012/dec/14/japan-conservatives-election-ldp-shinzo-abe” target=”_blank”>Guardian article indicates that the primary impetus is softness towards China in the recent Senkaku border dispute. Continue reading
According to this article, Japan has a history of baiting illiterate foreigners with promises of prosperity to contribute to the Japanese economy. Then, as their best years fade, their visas are not renewed due to their illiteracy and an institutional perception of them as the “others.” This seems to be a short-term problem to Japan’s long-term economic woes. However, the end of the article notes that such false promises are no longer as alluring as they once were and such workers have begun decreasing.
This leads to many questions of mine. If these people have been contributing to an already troubled Japanese economy, how much worse can things get? As this source of income and service dries up, will the situation deteriorate even more? Does this population contribute in any significant way to the Japanese economy?
Looking past this rather suspicious practice, it does seem that immigration may vital to Japanese economic prosperity. If talented immigrants can be brought in at a young adult wage, they have a lifetime of work to perform, decrease the age of the workforce, and the state only contributes towards their post-retirement benefits rather than also their childhood benefits, it would be a win-win for both parties.
This article is a bit outdated, but given the previous post’s argument that deflation has been a long term concern of Japan, I think that its arguments are still valid. It makes 4 counter-arguments against the premise that an aggressive monetary policy may be the solution to heavy deflation:
1. An expansionary monetary policy might allow people to pay their debts easier, but it disincentivizes both the private and public sector from balancing budgets. Shirikawa also argues that those without debts are incentivized to spend more, bring future demand to the present and increasing aggregate demand. This increase will diminish over time despite low interest.
2. The prolonged nature of shocks in China’s government might prompt companies to further invest in low interest investments that would only be profitable with aggressive monetary policy. This is an inefficient allocation of resources.
3. Flattening the yield too far will also cause inefficient allocation of resources and undermine profitability. Long term investments could yield negative returns.
4. Mr. Shirakawa’s fourth point is an argument about why banks such as fed should worry about the effect of easy policy of global commodity prices. In essence, he says that individual central banks that concentrate on domestic inflation targets that could end up causing global problems, which in turn make it hard to hit domestic inflationary targets.
The last point is rewritten from the site. It is what really confused me, and I think it’s really important. I would appreciate some input on explaining it to me.
From what I know of economics, an expansionary monetary policy to combat inflation seems textbook, but most of these counterpoints seem valid in this specific scenario.