Sunday, March 15, 2020

Rationale and impact of Japan’s expansionary fiscal policy and monetary easing The WritePass Journal

Rationale and impact of Japan’s expansionary fiscal policy and monetary easing Introduction Rationale and impact of Japan’s expansionary fiscal policy and monetary easing GDP of $6 trillion (IMF, 2012). It has, in recent years, shown signs of economic recovery with GDP growing at an annualized rate of 3.5 percent with the realization of 0.9 percent growth in the three months to March compared to the previous quarter. At the end of 2012, the Japanese economy, emerging from the recession grew at a rate of 1 percent (Evan, 2013; Anatoe, 2013). This growth and recovery is attributed to an attempt to stimulate the economy through aggressive monetary easing by the country’s central bank, the Bank of Japan, as well as big government spending. These decisive steps are contained in a new economic policy fronted by Japan’s Prime Minister, Shinzo Abe, popularly referred to as ‘Abenomics’ (Anatoe, 2013). This paper explores the rationale of Japan’s expansionary fiscal policy and monetary easing, discussing their impact on both the domestic and global economy over the short and longer term with regard to relevant theory. In an endeavour to resolve macroeconomic problems facing the country, Japan, in a complete break from the past, is pursuing the recently introduced policy package consisting of a three-pronged approach including: a flexible fiscal policy, a bold monetary policy and a growth strategy focused on encouraging private sector investment. The country is actively pursuing both an expansionary fiscal policy and monetary easing to revitalize the economy, ridding it of the deflation that it has suffered for two decades (Anatoe, 2013). Deflation in the economy is evidence of persistently inadequate demand (Case and Fair, 2006), with Japan’s national income (in nominal terms), despite perceived growth in the economy, still actually less than it was in 1994 (Evan, 2013). In the view of many economists regarding Japan’s economic challenges, macroeconomic stimulus concentrated on boosting demand, as pursued in the ‘Abenomics’ policy package, was long overdue (David, 2013; Anatoe, 2013; Evan, 2013). Post world war two, Japan rebuilt itself industrially and in sustaining a weak Yen and maintaining low labour costs, was able to flood Western markets with its exports. It, thus, was able to channel money back into society thereby realizing consistent economic assent. However, in the 1980s, shifts in dollar value and subsequent interventions led to the strengthening of the Yen. In an attempt to counter this unfavourable strengthening, the Bank of Japan (BOJ) issued vast quantities of Yen, massively increasing the money base (Anatoe, 2013). This easy money coupled with very low interest rates drove real estate and stock prices upwards to unreasonable levels, exacerbated by money inflows from the US and Europe. The country entered an econom ic bubble which subsequently burst wiping out tens of trillions of dollars in wealth and massive tumbles in asset prices (Evan, 2013; The Economist, 2013). To counter the tumble, BOJ increased spending and tried to encourage more lending, arranged bailouts of banks and insolvent firms leading to a cycle of stagnation, and continuously lowered interest rates, to its lowest 0.1%. Pensions and life-savings were wiped out and people became risk averse (Evan, 2013). A negative birth rate and the resulting shift in demographics is a significant structural problem that has led to the shrinking of the productive segment of the population and production capacity with dire economic and social implications contributing to the two decade stagnation (David, 2013; Anatoe, 2013). The country is at a tipping point and in the two decades has been living off past savings and sustaining its lifestyle, maintaining the faà §ade of equilibrium through deficit spending, backed by internal borrowing. Despite extreme growth in debt, this has insulated it against the kind of crises seen in Europe (Evan, 2013). This dire scenario necessitates the bold and drastic stimulus measures such as contained in the ‘Abenomics’ policy package (Anatoe, 2013; The Economist, 2013). Such measures are in line with the circular flow of income economic model which describes the reciprocal cycle of incomes between producers on the one hand and consumers on the other. With the unlimited and recurring nature of human wants driving demand and continuous production, these entities provide each other with factors that facilitate the circular flow of income. Firms provide consumers with goods and services in exchange for their monetary expenditure, with another level of their engagement involving exchange of factors of production such as land, labour and capital for rent, wages, interest and profits. This latter income for the household sector drives expenditure and consumption from the business sector completing the continuous cycle (Hansen, 2003; O Sullivan and Steven, 2003). The more realistic five- sector model of the circular flow of income entails producers and consumers, in addition to financial, government, overseas sectors engaged and influencing the cycle. A state of equilibrium in the circular flow of income occurs when the total leakages from the economy (savings, taxes and imports decreasing money supply) equal total injections (investment, government expenditure and exports increasing money supply). States of disequilibrium affect income, production (output), expenditure and employment with their levels falling leading to recession or contraction of economic activity if leakage surpasses injections or rise leading to boom and expansion if injections exceed levels of leakage (Case and Fair, 2006). Reduction of income leads households to cut down on savings and expenditures in taxation and importation leading to a fall in leakage. This is driven until leakages equal the lower injections into the economy thereby lowering the level of equilibrium and vice versa. This model outlines the interdependence of the various factors interplaying in the economy, balancing production and consumption through controls such as incomes and, therefore, demand and expenditure (Vladimir, 2011). Fiscal and monetary policy strategies seek to bring the economy to a level of equilibrium, or when necessary, to encourage disequilibrium which gives a semblance of growth, increasing injections into the economy and thereby fostering boom and expansion in the economy. It also serves to temper growth when the economy heats up (O Sullivan and Steven, 2003). To restart Japan’s battered economy and to drive it into a growth path, there was need for such drastic measures increasing the requisite injection s and thereby safeguarding the economy from the unfavourable recession and a contraction of the overall economy (Heyne, Boettke, and Prychitko, 2002). The stimulus package entailed a 10.3 trillion Yen stimulus, the takeover of Japan’s Central Bank which hitherto was unwilling to undertake the required bold experiments in monetary policy, and commitment to clear-cut comprehensive structural reform (The Economist, 2013). These initiatives were founded upon Keynesian economic theories based on the belief that proactive actions of government comprise the only means to steer the economy. Government should employ its power to increase spending and create an easy money environment thereby increasing aggregate demand (Galor, 2005). These stimulus measures have received a good report from various analysts with most perceiving Japan’s economy to be on the right track to recovery. This is evidenced by citations of a jump in individual spending on the back of a rally in Japanese stocks, as well as recovering exports. Of note is the rise of the main Nikkei 225 45% this year with the 3.5% anticipated growth rate expected to outpace major economies such as the US and the Eurozone (The Economist, 2013). Falling prices deter spending both by business and consumers (injections) with their tendency to hold out for a better deal with a consequence of reduced demand overall. Pumping trillions of Yen into the money supply (leakage) has therefore been beneficial in pushing down the currency’s value and has significantly helped exporters enhancing their competitiveness in overseas markets and increasing the value of the profits repatriated (Anatoe, 2013). This has also led to the huge rally in Japanese stocks as investors rush to take advantage of the potential for companies to acquire bigger earnings (Evan, 2013). Despite the plan’s short-term success, some analysts are however questioning the sustainability of the recovery. Hesitation by companies to boost their investment in spite of improved business sentiment is cited pointing at company spending which fell 0.7% in the three months although an increase was expected (Evan, 2013). Convincing companies to spend is a key part of the stimulus plan enabling the pulling of the country out of deflation.   Also crucial is the interplay between Japan and other countries its neighbours, relates to and competes against, notably China, Taiwan and South Korea. The monetary and fiscal stimulus designed to end chronic deflation has seen a sharp devaluation of the Yen which is not only unsustainable, but also unfair to other countries. This type of recovery is unfair since it comes at the expense of Japan’s trading partners and geopolitics, with strong economic policy reactions from Japan’s neighbours almost inevitable (David, 2013). There is a risk of their interference in the foreign exchange markets to stop the appreciation of their currencies with trade disputes likely to emerge against certain Japanese exports and increasing scrutiny of Japanese investments (David, 2013). Such moves will prove unfavourable to Japan’s external trade in the longer term. The challenge going into the future is in seeking to deliver anticipated economic growth following the unprecedented macroeconomic expansion. What is needed is sustainable growth in the longer term and this requires the restructuring of the economy, enhancing overall productivity and increasing the participation of the labour force in production (Vladimir, 2011). Economists and investment analysts looking from the bottom-up are more sceptical citing profound structural problems such as Japan’s shrinking population, misallocation of investment, huge public debt, inflexible labour practices, unimaginative management, protectionist lobbies among others, which can hardly be fixed through monetary policy measures (Evan, 2013). Macro-investors, on the other hand, are contented with the positive fiscal and monetary expansion and consider it a good opportunity to buy Japanese equities and to sell the Yen. If this latter group maintain their bullish run, with enough conviction to troun ce the scepticism of the bottom-up investors, Japans economy in its present reality could change in the longer term (The Economist, 2013). Despite initial success in shoring up the stock market and increasing expenditure in the short term, the transmission mechanisms linking the monetary policy to long term economic outcomes for Japans economy remain fragile. To ensure a sustainable long-term increase in productive capacity, there is need for plans to fix the deep structural and demographic problems the country faces (The Economist, 2013). Most of these factors are however beyond government control and it can therefore just set the tone, encouraging players in the economy to support the policy measures. An example of this is corporate labour practices under the control of the private sector/business (Vladimir, 2011). References Anatoe, K., 2013. The radical force of Abenomics. Reuters (May, 17). Viewed from: http://blogs.reuters.com/anatole-kaletsky/2013/05/17/the-radical-force-of-abenomics/ Case, K., and R., Fair, 2006. Principles of Macroeconomics. Prentice Hall. David Li, 2013. Abenomics will only damage Japan’s neighbours. Financial Times (22, May) Evan S., 2013. Testing Abenomics. Bloomberg view (June 6, 2013). Viewed from bloomberg.com/news/2013-06-06/testing-abenomics-.html Galor O., 2005. From Stagnation to Growth: Unified Growth Theory. Handbook of Economic Growth, Elsevier Hansen, B., 2003. The Economic Theory of Fiscal Policy. Volume 3. Routledge. Heyne, P., P., Boettke, D., Prychitko, 2002. The Economic Way of Thinking. (10th ed). Prentice Hall. IMF, 2012. Statistics on the Growth of the Global Gross Domestic Product (GDP) from 2003 to 2013. October, 2012. O Sullivan, A., M., Steven, 2003. Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. The Economist, 2013. Japan and Abenomics: Once more with feeling. May, 18. Tokyo Vladimir N., 2011. Econodynamics. The Theory of Social Production. Springer: Berlin.

Friday, February 28, 2020

Social Security's Uncertain Future Essay Example | Topics and Well Written Essays - 500 words

Social Security's Uncertain Future - Essay Example As is usually the case, the argument revolves around each person's own self-interest. The public has been fed information that has swayed the debate as each camp tries to gain public support. It is fair to say that the truth probably lies somewhere in the middle and that is also where we will find a solution. Reaching an agreement is difficult because of the misinformation that continually comes out of our nation's capitol. Baby Boomers are just now beginning to enjoy the benefits of the program. They have been told that the system is broke and they rightfully fear that they may not reap the rewards from the money they have spent a lifetime contributing. Shipman claims the system is a,"[...] coercive, intergenerational transfer tax system that relies on unrealistic assumptions and pays unreasonably low benefits". From their point of view, an overhaul offers them some hope that the system will be functional when they retire. But is their fear well founded There are well-intentioned people that say the panic is all for nothing. There are political factions that insist the system is not broke and with a little tweaking it will operate as intended for decades. They contend that the people who have the most to gain from privatization are large banks, brokers, and insurance companies. It is these powerful lobbies that promote fear about the system going bankrupt.

Wednesday, February 12, 2020

Week9 journal entry Assignment Example | Topics and Well Written Essays - 250 words - 1

Week9 journal entry - Assignment Example The appropriate governance plays a critical role in devising solutions to issues that may be affecting a country such as what China is attempting to resolve. Democracy is the key aspect behind nation working in collaboration towards a common goal because ides are contributed from various sources, then analyzed before they are implemented. The style of leadership is equally important because it determines the procedure of decision-making. This is in turn related to the third essay in that the issue of environmental degradation in China brings up the idea of international relations as the country attempts to acquire assistance from the U.S in reducing carbon emissions. When leaders facilitate the connection of countries through helping each other at times of need, democracy prevails and better living standards are realized. This therefore explains the importance of democracy as well as establishment of good international

Friday, January 31, 2020

Mosquito- Shadow Animal Totem Essay Example for Free

Mosquito- Shadow Animal Totem Essay The mosquito is my shadow animal totem because it tests me to overcome small irritations. When a mosquito bites me, I’m usually not too happy about it. Even though it is just a small bump on me, it allows the mosquito to lay its eggs as the small amount of blood they suck is enough to last for a few days. After I have been bitten I need to find the patience to overcome the itchiness. Realistically, a mosquito bite is just a small inconvenience but I am afraid to stop worrying about it and move on to the bigger things that actually need my attention. The mosquito reminds you to listen to the lessons you are experiencing. It allows you recognize the attitudes of others and not only personal attitudes. Also, it makes you think about what that small irritation has done for the food chain or one animal in particular. Another thing the mosquito shows us we need to trust our bodies to take care of the bump or it will itch later on if we scratch it. The bump will be taken care of by our body so our job is to focus on the things that matter in life. Mosquitoes give us a chance to test ourselves and revitalize our spirits. I seem to fail this test a lot, which is why the mosquito appeared to me as my shadow animal totem. When I can overcome a bite from a mosquito, I will have learned to be more patient and trust my body to do its job. Mosquitoes live on still water until they reach adulthood and then they follow a trail of carbon dioxide which will be its blood source. They can suck blood from a lot of creatures but they choose mainly humans, herbivorous mammals, and birds. Only the female mosquito sucks blood because it needs the protein and iron in our blood to develop its eggs. Both females and males use plant nectar, fruit juices, and liquids that ooze from plants as another food source. A mosquito has a long, slim body with 6 legs, a mouthpiece called a proboscis designed to suck in food, and two antennae. Mosquitoes are nocturnal but they do rest in dense vegetation, caves, tree holes, chicken coops, stables, and basements during daytime. When a male mosquito wants to find a mate it will listen to the sound of the female’s wings as they reach a higher frequency than the male can get to. Even as they are mating, they will change the beat of the wings to different frequencies and create a â€Å"duetâ⠂¬ .

Thursday, January 23, 2020

Woman and Abortion :: essays research papers

Woman and abortion has always been an issue concerning everyone else except the female who is having the child. Most US citizens today believe that abortion is the wrong way to go, the unborn fetus has no chance at life. It is against the Catholic religion to do this but many people have to do this. Abortions are usually wanted by the teenagers in our society, whether they had made a mistaken and forgot to wear a condom or just chose not to wear one. This article is stating that our government is going to start testing the mothers who are caring a child. They want to ensure that the rights of the unborn fetuses are upheld. The rights of the baby should be upheld, and I believe that it will be but I also believe that there are groups that will not agree with this. These groups will protest at this trial to ensure what they wish to happen occurs.   Ã‚  Ã‚  Ã‚  Ã‚  The Supreme will decide whether pregnant women can be tested for drugs. If being tested for drugs just means taking blood then it would not be harmful towards the unborn fetus. In this case the Supreme Court is deciding whether or not a woman can be given an injection to be tested for a drug. But will this injection hurt the baby, or is it for the good of the baby so that the mother may be given help if she is in fact a drug addict. It was recorded in 1985, in South Carolina, that a hospital in the south would take any measure necessary to make it possible for the unborn fetus has a healthy birth.   Ã‚  Ã‚  Ã‚  Ã‚  The unborn fetus should have rights, but how do we know when the unborn child is in danger. We need to use and make laws to ensure that pregnant women in no way possible can harm their babies. Unfortunately this is nearly impossible to accomplish, for it can only be accomplished when the pregnant woman comes into her doctors office for a check up. When she does come in for a check up, as of now, the doctor can only advise you on what to do. Unless you are tripping over your own feet, or there is something visibly wrong with the way you look the doctor can not do anything with out your consent.   Ã‚  Ã‚  Ã‚  Ã‚  The hospitals, doctors, and whom ever else there is out there in the world who is out to help you should have more rights than they have now.

Wednesday, January 15, 2020

Illustrate the theme of isolation in “Of Mice and Men” by John Steinbeck Essay

In the novel â€Å"Of Mice and Men† which was set in the 1930’s I believe that John Steinbeck Illustrated loneliness and solitude in many places. The seclusion in those times was due to mainly discrimination and injustice. The life of a customary worker would be very difficult, therefore people worked for others on their farms. The wages were not proportional to the amount of labour and in addition the accommodation was barely habitable, this was unjust. The two focal characters George and Lennie have a sturdy bond and companionship. The other characters in the story are missing a true acquaintance and are envious of the two men. They have never before seen two men unite together like that before. All the other characters in the book are all abandoned and dejected apart from Slim. George and Lennie were wedged together through thick and thin, through good and bad and they knew they needed each other. This was revealed as George Said â€Å"Guys like us that live on ranches, are the loneliest guys in the world. † This meaning that if not for each other they would be like the others on the ranch, discontented and lonesome. The others on the ranch had recognised this, as their fellow workers said â€Å"Funny how you an’ him string together. † This had highlighted the unusualness of the situation and the migrant lifestyle of the 1930’s. While the whole ranch suffers from loneliness there are a few individual cases that are emphasised throughout the whole book. There are three main people in the book who suffer, Crooks, Candy and Curleys Wife. They all suffer injustice in the form of prejudice and discrimination. Candy was thought of as an outcast as he has no longer got the physical ability due to his age; and his physical disability does not help his cause. Candy had one true friend nevertheless, his dog. Once the dog was killed by Carlson, Candy was forced to seek friendship in another form. He knew that he was going to be given his marching orders shortly, as he said â€Å"they’ll call me purty soon. † While he was in the bunk house one day, he over heard George and Lennie talk about their lifelong dream. Candy decided to help George and Lennie accomplish their dreams. Candy had presented to facilitate in the form of money and manual labour. This was a move of desperation but worked as the two men accepted Candy’s offer. Candy basically tried to buy friendship, this does not always produce true friends. Crook’s a black man who faced isolation from the racist community. Crooks is not allowed to socially interact with others around him because of his colour which is similar to Lennie’s situation as Lennie was unable to interact with people due to his mental condition. Crook’s is restricted from doing customary things along side the white. He recognises how he has been treated and acts towards the white people who have affronted him how he himself is being treated. Crook’s is also an envious man. He is extremely resentful of George and Lennie’s tight friendship as Crook’s says to Lennie while in the barn together â€Å"well, s’pose, jus s’pose he don’t come back. What’ll you do then? † this was asked because Crook’s did not have any friends and did not know how it would feel to lose them unexpectedly. Knowing that Lennie was mentally ill, Crook’s decided to torture him because he wanted to ease some anger because he was discarded and unwanted by the others. Crook’s is so lonely and striving for a good life he will do anything to live peacefully.

Tuesday, January 7, 2020

Positive And Negative Effects Of The Renaissance - 798 Words

Austin Groshens HIST 103- Western Civilization 1 12/3/2017 Section Three: Essay Renaissance While the renaissance period of history is long over, it dramatically impacted the modern world. Some of the great discoveries in science, developments in the arts, architecture, and humanism took place during this period of history. The results had major impacts on politics at that time as well into the future. The renaissance left both positive and negative influences on the world as we know it. The renaissance is defined as the â€Å"rebirth† of civilization in Europe from the 14th to 17th centuries (General Characteristics of the Renaissance). A renewed interest of classical world spread from its beginning in Italy, north to Germany and†¦show more content†¦World expansion began with Christopher Columbus and Ferdinand Magellan journeys to discover new trade routes and ended up forever changing the shape of the world (Guisepi). All of these amazing discoveries were not without incidences and consequences. During the renaissance, the philosophy of Humanism wa nted people to question authority and to examine the world around them. Along with this came a change from the passive life to being active in the world around them (General Characteristics of the Renaissance). People were to take part in every aspect of life, publicly, religiously and politically. With the down fall of feudalism, city states and monarchies came to power. With each came a language and a culture of their own, loyalty to Rome and the pope became secondary. This was the founding of the countries of Europe (Guisepi). Martin Luther disagreed with the belief held by the Catholic Church that only through the church could one be saved. By challenging the Catholic Church, Luther started a chain reaction that saw the split from the church and the formation of the Protestant reformation (General Characteristics of the Renaissance). The church battled for power and by attacking the very nonconformist that Humanism had fostered. Galileo and Luther were both branded as heretics ( Staff). This resulted in a division between secular and spiritualShow MoreRelatedThe Harlem Renaissance : A Literary, Artistic, Cultural And Intellectual Movement1485 Words   |  6 PagesTatiana Moore Mrs. Donald English III 26 March 2014 The Harlem Renaissance The Harlem Renaissance was a literary, artistic, cultural and intellectual movement. The word renaissance means rebirth or revival. African Americans during this time were being pressured by Jim Crow Laws in the South. These laws separated the races tremendously (Roses). African Americans appeared ignorant, poor, and servile. 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