JAPAN-BETTING ON
INFLATION
GROUP 6:
Lâm Sở Đình
Dương Đình Khải
Phạm Hà Khánh Nhi
Tung Tuấn Kiệt
Nguyễn Anh Tuấn
HISTORICAL BACKGROUNDS
After a year in office, Prime Minister Shinzo Abe needed to
assess his achievements and determine his potential goals.
Though early projections for the third quarter were slightly
lower, GDP growth at annual rates in the first two quarters of
2013 was 4.3% and 3.8%, respectively.
In contrast, the annualized quarterly growth rate was less
than 1% from 1994 to 2012.
HISTORICAL BACKGROUNDS
After a year in office, Prime Minister Shinzo Abe needed to
assess his achievements and determine his potential goals.
HISTORICAL BACKGROUNDS
Though early projections for the third quarter were slightly
lower, GDP growth at annual rates in the first two quarters of
2013 was 4.3% and 3.8%, respectively.
In contrast, the annualized quarterly growth rate was less
than 1% from 1994 to 2012.
FIRST ARROW: MONETARY POLICY
THREE ARROWS APPROACH
FIRST ARROW: MONETARY POLICY
THREE ARROWS APPROACH
SECOND ARROW: FISCAL POLICY
THREE ARROWS APPROACH
THIRD ARROW: STRUCTURAL REFORMS
THREE ARROWS APPROACH
FIRST ARROW: MONETARY POLICY
SECOND ARROW: FISCAL POLICY
THIRD ARROW: STRUCTURAL REFORMS
PURPOSE:
-EXIT FROM DEFLATION
-BOOST ECONOMIC RECOVERY
First Arrow-Quantitative and
Qualitative Monetary Easing
FIRST ARROW:
Abe radically changed the mission of the Bank of Japan (BOJ)
by appointing a new Governor to fight deflation.
HIS GOALS
2% of inflation target reached within 2 years
The currency base is increased by 2 times;
Long-term public debt and total assets balance increased by
2 times.
Results
The policy enhances the competitiveness of Japanese
exporters by weakening the Yen, but the inflation target
remains out of reach
FIRST ARROW:
THREE ARROWS APPROACH
FIRST ARROW: MONETARY POLICY
SECOND ARROW: FISCAL POLICY
THIRD ARROW: STRUCTURAL REFORMS
PURPOSE:
-EXIT FROM DEFLATION
-BOOST ECONOMIC RECOVERY
Second Arrow- Stimulate the
economy with Fiscal Policy
SECOND ARROW: FISCAL POLICY
The policy included
supplementary budget to
increase government
spending. Additional 10.2
trillion yen in the fiscal
year ending in March 2013
was proposed.
RESULTS
His expense has boosted the revenue, invested in some
businesses, stimulated in financial market and real estate, with
all the above the country was a rising star in several years.
RESULTS
However, it did not save Japan’s GDP from a recession between
2014-2015 and into 2020.
RESULTS
In fact:
The core of the first and second arrows is the depreciation of
the yen through monetary easing (increasing the debt rate
to print more money) and fiscal easing (delaying the
consumption tax, increasing infrastructure investment).
RESULTS
In theory:
The first two arrows are necessary sacrifices and material
preparations for structural reforms.
THREE ARROWS APPROACH
FIRST ARROW: MONETARY POLICY
SECOND ARROW: FISCAL POLICY
THIRD ARROW: STRUCTURAL REFORMS
PURPOSE:
-EXIT FROM DEFLATION
-BOOST ECONOMIC RECOVERY
THIRD ARROW - “Japan Revitalization Strategy”
THIRD ARROW: STRUCTURAL REFORMS
Aimed at creating productive opportunities for investment that
would yield a sustained 2% GDP growth rate and labor
productivity.
THIRD ARROW - “Japan Revitalization Strategy”
THIRD ARROW: STRUCTURAL REFORMS
The strategy looked for increase in labor force participation,
particularly women to fight the projected decline in Japan’s
population.
Result
The number of women and elders working in office start to
increase rapidly and the policy of labor immigrants is loosened.
In addition, shortage of labor force solve.
SUM UP
After the launch of the Three Arrows, it brought about a
satisfactory result for Abe. The yen has depreciated sharply,
the stock market has risen, and the CPI has risen.
SUM UP
After half a year, Japan’s economic growth rate has reached
an unprecedented 4. The program had seemingly achieved
progress towards its goal.
Japan’s economy 1990s to 2000s: the “lost
decade”
From 1991 through 2001, Japan experienced an
economic recession followed by the economic
stagnation
Japan’s economy 1990s to 2000s: the “lost
decade”
During this recession period, Japan has suffered from
credit crunch and liquidity trap
The fall of the world envied economy
After the WWII, Japan's economy was the envy of the
world
The fall of the world envied economy
GDP grew at an annual rate of 3.89% in the 1980s,
compared to 3.07% in the United States
The fall of the world envied economy
In 1990s this growth slowed down as Japan faced the
down turn in the economy.
The fall of the world envied economy(2)
According to Investopedia.com, from 1991 to 2003,
Japan’s GDP grew only 1.14% annually
The fall of the world envied economy(2)
In the fall of 1989, Japan's equity and real estate
bubbles burst
The fall of the world envied economy(2)
In the late 1980s, BOJ stopped money supply, as the
equity price fell, BOJ continued to raise interest rates
The fall of the world envied economy(2)
In 1991, as equity and land prices fell, BOJ turned
around and cut interest rate
Liquidity trap
An economic situation when interest rates are very low
and saving rates are high, households and investors
tend to sit on money, either in short term accounts or
cash on hand
Liquidity trap
To break out of this event, households and firms have to
be encouraged to spend and invest
Credit crunch
An economic situation when lenders refuse to lend for
companies as they afraid of bankruptcies
Credit crunch
To break out of this event, bank losses must be
recognized
The future prospect
Japan’s economic recovery in 2020 was relatively
strong
The future prospect
However, the strong start to the recovery was upended
this year as the pandemic worsened
The future prospect
The time is right for Japan to undertake bolder moves,
bigger investments, and deeper reforms
FOREIGN POLICY-ROK
Relations with KOREA is normalized although outrage is
still exist:
FOREIGN POLICY-ROK
“ Comfort women” : Japan’s apologies for the
unfortunate time in the past.
FOREIGN POLICY-ROK
Yasukuni Shrine: The distressing thing was found that it
had secretly added the name of “ class A war criminal”.
FOREIGN POLICY-ROK
Dokdo/ Takeshima island: occupied by ROK illegaly
FOREIGN POLICY-CHINA
Disagreement over the Senkaku/Diao yu island:
US handed their administration back to Japan in 1971.
However, China adopted it by Chinese name : Diaoyu.
Chinese records of these islands date back to as the
early as the 15th century (1534).
FOREIGN POLICY-CHINA
Relation with China is challenging because of the
island, which is located in a strategic position
FOREIGN POLICY-CHINA
Japan has to keep the relation with China while
protecting its territory
FOREIGN POLICY-CHINA
According to Abe’s policy: increase GDP by surging
export level; However, China is the best trader among
Asian countries
FOREIGN POLICY-CHINA
In contrast, the US is the best trader of China, so, Japan
build bridges with the US to put pressure on China
Keep the economic relation with China
Is Abe’s foreign policy consistent with
his economic strategy?
Foreign strategies of Abe are about peace and especially
establishing diplomatic relations to gradually set up close-
knit friendships between Japan and another countries.
Moreover, the economic policy of Japan includes the
promotion of transactions (mainly about Export), so these
policies help Japan to build bridges with countries which
are in ASEAN (leading market of Japan) and develope
export.
