Policies and Prospects in Japan and the Implications for the Asia-Pacific Region

Tim Callen and Warwick McKibbin

No 2001/131, IMF Working Papers from International Monetary Fund

Abstract: This paper uses the G-Cubed (Asia-Pacific) model-a macroeconomic model with rich cross-country links-to explore the implications for Japan and Asia of several shocks to the Japanese economy. The results suggest that, while fiscal consolidation in Japan would initially dampen domestic growth, over the medium term the impact on both the domestic and regional economies would be positive. Quantitative monetary easing in Japan would boost domestic activity in the short-run, while being basically neutral for the region. Finally, a loss of confidence in the yen would be negative for Japan, but positive for the region because of a reallocation of capital flows toward non-Japan Asia.

Keywords: WP; Japan; real GDP; price; real interest rate; Asia-Pacific region; macroeconomic model; yen depreciation; equity price; role Japan; BoJ purchase; price effect; imports of machinery; depreciation of the yen; foreign direct investment; Real interest rates; Exports; Fiscal consolidation; Imports; Asia and Pacific; Europe (search for similar items in EconPapers)
Pages: 57
Date: 2001-09-01
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Citations: View citations in EconPapers (19)

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