The Economic Malaise Case Study

In: Business and Management

Submitted By marla523
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1. In the 1980s Japan was viewed as one of the world’s most dynamic economies. Today it is viewed as one of its most stagnant. Why has the Japanese economy stagnated?
The Japanese has stagnated due to Japanese banks. The banks over lent, made it easy to borrow and in turn created bad debt, it make it difficult to replace the money borrowed and cause a deficit causing the deflation in the country. “The Nikkei average plunged from nearly 39,000 points in December 1989 to about 14,300 points in August 1992, thereby losing about 60% of its value. As a result, investors lost the equivalent of (U.S.) $2 trillion and property values plummeted by about $10 trillion. Property values in certain parts of the country declined by 70% and plunged Japan into a deep recession for 10-years.” (Alston, 2013)
To summarize the stock market collapsed, property prices dropped, banks curtailed the easy lending practices the created the economic boom, consumer spending halted- recession created, deflation, and the Japanese government was unsuccessful

2. What lessons does the history of Japan over the past 20 years hold for other nations? What can countries do to avoid the kind of deflationary spiral that has gripped Japan?
Other nations can learn from what happened with Japan. Strict lending practices should have been in place to begin with, this would help decrease the amount of bad debt. The Government need to watch its spending. Japan is stuck because its debt is so high, it is extremely difficult to become strong again.

3. What do you think would be required to get the Japanese economy moving again?
In order to get the Japanese economy moving again, the Japanese government should do three things. First, fiscal stimulus that would raise the growth rate of the country above where it is at and where it is expected to be. Less unemployment and more job creation that way more…...

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