Saturday 25 January 2020

Japan's Economy struggles with Debt, Deflation and Depopulation

This Youtube video is interesting about Japan's Economy battling Debt, Deflation and Depopulation. Japan is quite rich in terms of its highly developed economy. The country is positioned as 3rd in terms of nominal GDP.

In 2013, the Japanese public debt exceeded one quadrillion yen (US$10.46 trillion), which is more than twice the country's annual gross domestic product. By 2015, the figure rose to US$11.06 trillion.

Japan has suffered 15 years of grinding deflation since a so-called asset-inflated bubble burst in the late 1990s. Bank of Japan Governor Haruhiko Kuroda, mandated by Abe to put an end to deflation, has pledged to achieve the bank's 2% inflation target through aggressive monetary easing.

Japan’s population is decreasing since it hit a peak in 2008. The shrinking population is having a big impact.

1 comment:

  1. Japan’s GDP shrinks dramatically after a tax rise and a typhoon

    Japan has problems that are fiscal, natural and viral. Coronavirus may compound matters.

    (FEB 2020) Economists still argue about the merits of Abenomics, the experimental mix of policies introduced by Japan’s prime minister, Abe Shinzo, seven years ago, in an effort to chase away deflation and stagnation. But 2 lessons are beyond debate. Japan’s bond market is remarkably docile despite the government’s towering debt. Japanese households, however, are painfully sensitive to increases in the consumption tax, a broad value-added tax imposed on most of their purchases. After the government raised the tax from 8% to 10% on October 1st, the economy shrank at an annual pace of 6.3% in the fourth quarter of 2019, according to figures released on February 17th.

    The tax increase was an unforced error. The government faces no immediate need for additional revenue. Despite gross debt nearing 240% of gdp, its borrowing remains absurdly cheap. The yield on a ten-year government bond is stuck at about zero, where the country’s central bank, the Bank of Japan (boj), has pegged it since 2016. That peg obliges the boj to buy as much government debt as necessary to keep long-term interest rates low. Such determined efforts to stimulate borrowing are needed chiefly because private spending has been weak. Too weak, at least, to lift inflation to the boj’s target of 2% from the current 0.8%. Thus the consumption-tax rise was doubly strange. It made it even harder for firms to sell goods to Japan’s inhibited consumers, for the sake of reducing the number of bonds Japan’s government sells to a customer who has sworn to bid for them anyway. It was like adding ballast to the waterlogged side of a ship.

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