Exploring Japans Recession

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Submitted By crnypunlia1
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The recession felt by the Japan economy in the 1980s is similar to the recession affecting current U.S. economy today. “Overall during the 1990s, Japan tried 10 fiscal stimulus packages totaling more than 100 trillion yen, and each failed to cure the recession” para. 7. Another similarity between the recessions in japan with current Unites States economy concerns the banking industry. “Japan's banking system is widely regarded as in need of restructuring. Much of the stimulus that reduced rates could provide has not been realized because the banking community has been increasing its liquidity instead of increasing its lending” para. 21.
The differences between Japans recession and the current U.S. economy is that their "government attempted to offset the stronger yen by drastically easing monetary policy between January 1986 and February 1987. During this period, the Bank of Japan (BOJ) cut the discount rate in half from 5 percent to 2.5 percent. Following the economic stimulus, asset prices in the real estate and stock markets inflated, creating one of the biggest financial bubbles in history. The government responded by tightening monetary policy, rising rates five times, to 6 percent in 1989 and 1990. After these increases, the market collapsed” para. 2. Another difference between Japan and Unites recession is that, “funds are not allocated according to market-based consumer preferences, but to the most politically connected businessmen. This leads to a higher cost of borrowing for those seeking private funds, further distorting the economy. Also, because the loans are often highly risky, Japan's fiscal condition deteriorates further” para. 10.
The cause for the Japanese recession is the same as that of the U.S. economy. The government is providing bailout for many companies but the people still have debt. The people are trying to pay down their debt to…...

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