Wednesday, September 25, 2013

Japan : between economics and the harsh reality fiction

 With more or less deviations , macroeconomic theories have served , in general, to solve the economic and financial imbalances in most countries that have entered recesión.Todas , except perhaps one, Japan .

In this sense , the case of Japan is paradigmatic in the global economy. As recently as fifty years ago, nobody would have included the Japanese country within the international benchmark countries from the economic standpoint . After forty years of sustained growth , often spectacular , this situation was reversed because, among other things , to the amazing fluctuations experienced by the stock price from the mid-eighties and early noventa.Como can see from the chart , between 1985 and 1989 , the Nikkei rose from around 13000-39000 , ie, the average price of the shares nearly tripled in just four years. This huge increase was followed by a much sharper decline because in just two years, the Nikkei fell from 35,000 to 16,000.

 But , why did this phenomenon? Most economists agree that the main cause of this behavior was due to a speculative bubble in the price of certain assets , especially housing and land , whose prices rose in line with the Nikkei , but later decreases in prices were much more pronounced. That is, as happened in Spain , the housing bubble burst and were really negative consequences for the Japanese country , reaching trigger a massive recession.

This is when the economy starts fiction in Japan . The Japanese government launched a package of measures Keynesian stimulus through increased public works spending and tax cuts to stimulate consumption , causing large and persistent deficits. Similarly, the Bank of Japan lowered interest rates to very low levels to encourage investment , from 6% in 1990 to 0.5 % in 1995 and finally to 0% from 1999 to the present . Since then , Japan has lived caught in a liquidity trap steady .

 However, despite low interest rates and stimulus measures by the government , the recession continued throughout the 1990s , leading many economists to believe that the problem should be structural rather than cyclical as was originally thought , especially the problem of the financial system , which has encountered numerous loans could not be paid .

But there is one last problem : the evolution of the trade balance . Japan has traditionally been a purely export country , thanks to a powerful industry based on technological products and goods related to the automotive sector with high added value . But what happened? Fate would have it, on March 11, 2011 , Japan suffer one of the worst earthquakes in its history, accompanied by a strong tsunami that caused the accident in a nuclear power plant north of the country , the Fukushima plant , which made rethink the Japanese government nuclear policy . Therefore, the fiscal crisis and the currency crisis was added a nuclear crisis triggered a strong dependence on foreign energy which, together with the continued devaluation of the yen by low interest rates, makes him out very expensive Japan import energy which has caused these deficits in the trade balance.

Therefore, the Japanese crisis is explained by a cluster of fatalities that has plagued the Japanese economy with great virulence. The Japanese central bank has tried to mitigate these effects up to 9 quantitative easing , and the Government is launching major stimulus packages to revive the economy , especially trying to accelerate the reconstruction of the area of Japan hit by the tsunami. For the moment , these measures are having the desired effect, for now , the harsh reality is overcoming , and by far the economy fiction.

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