The Over-Valued Yen and the Low-Pressure Economy Repressed Productivity in Japan

Koichi Hamada and Koji Nomura

International Journal of Economics and Finance, 2023, vol. 15, issue 6, 1

Abstract: In the post-war economy of Japan, the high-pressure economy as defined by Okun and Yellen maintained its real exchange rate relatively low and kept the economy mildly inflationary. Not only did it encourage short-term employment but it also fostered a long-term productivity trend as measured by its total factor productivity (TFP). International pressure for a stronger yen after the Plaza Accord, coupled with the restrictive monetary policy of the Bank of Japan, created a large exchange rate gap and accordingly, the extreme Japan-U.S. output price gap, referred to as the price level index (PLI), in 1995. It further caused the squeeze of domestic wages and led to the deflationary pressure that plagued the Japanese economy for decades. In our opinion, the exchange rate also depressed domestic capital accumulation caused by the internationally low nominal rate of return on capital and that situation caused the TFP stagnation in Japan.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ccsenet.org/journal/index.php/ijef/article/download/0/0/48673/52442 (application/pdf)
https://ccsenet.org/journal/index.php/ijef/article/view/0/48673 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:15:y:2023:i:6:p:1

Access Statistics for this article

More articles in International Journal of Economics and Finance from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().