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Since we haven't really heard too much about Japan's financial crisis, this article explains more about their current situation. I thought they were doing fine until I heard about it from class, and that's the same picture one would see if you visited there. The standard of living is still high, but with "the largest gross public debt-to-GDP ratio in the world (a whopping 190%)", something needs to change. The article states that the three main reasons for their decline include investing in government bonds, deflation, and relying on foreign demand.
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That number is a staggering statistic to see, but the saddest part is reading that it is bound to get worse. From what little I know about Japan, I know that the political leaders have been very conservative over the years and it looks like even though there has been a party change, the overall fiscal policy isn't changing at all. Beyond all of this though it's nice to get a perspective on a part of the world that I feel has been largely ignored during the financial crisis with so much of the attention on the US and Europe.
ReplyDeleteI agree but I think the authors of the article are naive when they discuss the current political leaders as being not agressive enough. Japan is a collectivist culture and I doubt any political leaders will take the same aggressive steps to combat the financial crisis as we did in the United States. Its a completely different culture which I think will make it more difficult for Japan to handle its financial crisis.
ReplyDeleteOne statistic I found interesting was the borrowing (Y44 trillion) for the first time was going to exceed tax revenue (Y37 trillion). This means they will have no chance to begin to reduce it's public debt to GDP ratio. It looks like they are going to be slowly burying themselves here. Cultural issues aside, it looks like they really do some radical sweeping changes.
ReplyDeleteIt shocking that this isn't a bigger deal than it is. I thought I would have heard more about Japans future problems especially in the condition the US is in. Its easier said then done but if we are starting to change the policies in the United States, why don't the other countries that have these financial issues address them before its to late.
ReplyDeleteI found the fact that they rely so much on foreign demand to be very interesting. I think Japan is a good example of a country that does not quite have the right recipe when it comes to foreign investment and policy as well as sustaining the domestic economy. They chose to primarily invest in government bonds and do not have solid investment into their structure in their own markets. They cannot fully rely on foreign markets as well as their own. They need a proper balance and clearly some drastic policy changes as everyone has mentioned to help this worsening situation.
ReplyDeleteI think you will begin to see some larger companies be pushed out of the picture if trends continue like this in Japan. I've heard the steel industry is supposed to lead Japan and the world out of recession as China demands more and more. However, extreme competition is causing companies to have price wars, even as the prices of raw materials are increasing. I agree, Japan needs a change in tax, foreign, or domestic policy as the 50 year old policies currently in place are not getting it done.
ReplyDeleteI agree w/ Bryan because they do rely to much on foreign markets. I think that it will get worse, and I have heard bits and pieces through the news so it may be seen as a bigger deal than we may think. It was also one of the countries the video in class predicted to gail w/ Greece.
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