group3 day4 shun-yi li yi-ping chen. background introduction despite years of near-zero interest...
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Group3 Day4Group3 Day4Shun-Yi LIShun-Yi LI Yi-Ping CHENYi-Ping CHEN
Background IntroductionBackground Introduction
Despite years of near-zero interest rates, Despite years of near-zero interest rates, Japan has suffered chronic deflation over Japan has suffered chronic deflation over the two decades since the bursting of its the two decades since the bursting of its real estate bubble in the late 1980s.real estate bubble in the late 1980s.
The Japanese government raised The Japanese government raised value added tax rates from 3% to 5% in rates from 3% to 5% in 1997, which worsened the recession and 1997, which worsened the recession and deflated the economy. The nominal GDP deflated the economy. The nominal GDP growth rate was below zero for most of the growth rate was below zero for most of the 5 years after the tax hike. 5 years after the tax hike.
So existing policies do not work. Just worse.So existing policies do not work. Just worse.
GDP growth before AbenomicsGDP growth before Abenomics
CPI YoY before AbenomicsCPI YoY before Abenomics
Defination of AbenomicsDefination of Abenomics
Abenomics(December 2012) refers to Abenomics(December 2012) refers to an aggressive set of an aggressive set of monetarymonetary and and fiscal policiesfiscal policies, combined with , combined with structural reformsstructural reforms, geared toward , geared toward pulling Japan out of its decades-long pulling Japan out of its decades-long deflationary slump. deflationary slump.
Abenomics have three arrowsAbenomics have three arrows
The BoJ will spend 117 billion dollars on public work.
AgriculturalHealth careEnergy marketLabor marketPilot initiatives
Significant effect of 1Significant effect of 1stst arrow arrow
In early 2013, soon after Mr Abe took office, the central bank duly launched a radical programme of quantitative easing.
Significant effect of 1Significant effect of 1stst arrow arrow
CPI shows inflation.
Significant effect of 1Significant effect of 1stst arrow arrow
The stock market soared.
Significant effect of 1Significant effect of 1stst arrow arrow
Will it work in the long term?Will it work in the long term?GDP growth
Some concerns from IMFSome concerns from IMF
Concerns inside Japan: 1Concerns inside Japan: 1stst arrow arrow Mr. Kuroda (central-bank governor) wanted the government
to stick with the plan to raise the consumption tax to 10. But soon after the central bank’s action, Mr. Abe postponed the rise anyway until April 2017, arguing that the economy could not bear it.
Mr. Kuroda is making it clear that he does not believe Mr. Abe is trying hard enough to bring the deficit down.
Mr. Kuroda promised to push inflation up to 2%. The Bank of Japan may not be doing enough to achieve this. Prices are at a standstill.
Mr. Abe now appears to be undermining Mr. Kuroda’s ability to reach it.
Concerns inside Japan: 2Concerns inside Japan: 2ndnd arrow arrow The main point of contention is fiscal policy with a primary
budget deficit of 6.6% of GDP. Even if the economy grows by 3% in nominal terms in each
of the next five years—an optimistic assumption—the government says it will need to find an extra ¥9 trillion to balance the budget, before interest payments, by 2020 as planned..
Thank you.Thank you.