Mini-case+7.2

** Mini-case 7.2: Japan: from boost to bust**



 * > **Don't forget** ||> **...to sign with your group's name beneath your text when you upload your response !** ||

**1. Write a summary of this mini-case** (100-200 words)
After the second world war the japanese economy boomed. In the early 1990s the country went into recession that lasted nearly ten years. During this time banks lost a lot of money that could not be repaid due to the increase of unemployment. This meant that the banks where owed vast sums of money because of previous loans that could not be repaid. Because of this problem Japan had to seek help from the Governement to help pull them out of this crisis.Unemplyment began to rise and the prices plummeted. This hugely increased Government spending which lead them to reduce their interest rates to nearly 0% all to try and get them out of the recession.

[Team BOOM, Tuesday 22/3/2011, 16:00-17:30]

After the second World War, Japan had an 'economic miracle' and become the second largest economy in the world. Early 1990's Japanese economy had a recession. 2004-2005 began a gradual recovery. 2008-2009 ended by the world recession. 1990's land prices and stock market prices boomed. Banks lent out money which could not be repaid. This meant that unemployment increased and prices fell. Consumers stopped spending at anticipation that prices would continue to fall. Governement emarked on the Keynesian expansion programme to increase governement spending and reduce interest rates.

[Spice Girls, Tuesday 22/3/2011, 16:00-17:30]

**2. Upload below your group response for each discussion question** (120-180 words) **:**
1. What was the Japanese government trying to achieve by this combination of expansionary fiscal and monetary policy?

The Japanese Government where attempting to get out of the recession and stabilise the economy. In monetary terms by reducing the interest rates to nearly 0 they where trying to speed up the process of loan repayment and gain trust from the banks again. In fiscal terms, the country aniticipated that if their public spending kept on steadily dropping it would send the country into a deeper recession so by increasing government spending they hoped it would increase their GDP and get the government out of debt as well as the majority of the country.

Spice Girls- Japan's overall plan was to return to their 1980's state and lable of being the secon largest economy in the world. They planned to achieve this by the Keynesian expansion programme which in effect was to increse government spending. They also vowed to reduce interest rates to encourage public spending.

[Spice Girls, Tuesday 22/3/2011, 16:00-17:30]

2. Given the extent of this stabilization programme would you have expected Japan to have recovered form the recession sooner that it did?

We wouldnt have expected Japan to recover from the recession as quickly as ity did as it was in the recession for ten years and seemed to be getting deeper and deeper with government debt increasing and unemployment levels rising. However Japan has done extremely well recently to arise out of this situation and into an economic boom whilst the rest of the world suffered. Although, the recent disaster in Japan will have adverse effects on the japanese economy, the extent of which are unkown up to now..

[Team BOOM, Tuesday 22/3/2011, 16:00-17:30]