Stagnant Japanese Economy

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Something having no current or flow and often having an unpleasant smell defines the word stagnant. The Japanese economy has been stagnant for about two decades now. There are many reasons for this ‘unpleasant smell’. Firstly, the fiscal policy in Japan, the surplus in savings, its once economic bubble power and the policy management in Japan put an end to any flow that there once was. Secondly, the Global flow and structural impediments are a cause of the lack of current. The liberal Democratic Party and Vested Interest Groups and also the monetarist explanation come into play. Looking at these such topics closely give a better look and realization of Japans stagnant economy.

Firstly, in 1997, Japans fiscal policy was causing output in contract towards the government. Fiscal is the use of a government taxation to influence the economy. Throughout the preceding decade, tax cuts have done a lot more to stimulate demand than increasing in public spending, partially because public works were extensively considered as inefficient. This suggests that a decrease in public works complemented by an identical decrease in taxes would enhance GDP (Gross Domestic Product). A rise in taxes would reduce growth and hence tax revenues, thereby increasing the government's deficit even further. Households in Japan know that taxes will become, and are an issue in which they will rise, thus they tend to save more with reducing the things they buy which then neutralizes the fiscal stimulus. Japanese savers remain unwilling to move their money overseas in search of greater revenues. The government could proclaim that the rate of sales tax was to be changed instantaneously from 5% to zero for a limited period, after which it would increase progressiv...

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...ic holding pattern.

Bibliography

• "BestThinking / Articles / Economics / Behavioral Economics / Japan: The Ravages of a Stagnant Economy and Its Implications for the United States (Article)." BestThinking. Web. 22 Nov. 2011. .

• "Causes of Japan's Economic Stagnation - Shorenstein APARC." Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC). Web. 22 Nov. 2011. .

• Http://www.economist.com/nod/133612. Web. .

• Ludwig Von Mises Institute. Web. 22 Nov. 2011. .

• Web. .

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