EconPapers    
Economics at your fingertips  
 

Japanization: Is it Endemic or Epidemic?

Takatoshi Ito ()

No 21954, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Japanization is defined as a combinations of the following economic conditions: (1) the actual growth rate is lower than the potential growth rate for an extended period; (2) the natural real interest rate is below zero and also below the actual real interest rate; (3) the nominal (policy) interest rate is zero; (4) deflation, i.e., negative inflation rate. As a summary measure for these conditions, the Japanization index, the sum of proxy for GDP gap, inflation rate and the nominal interest rate, is proposed. The growth rate, the inflation rate and the nominal and real interest rate has been declining since 1990. Since 2009, major advanced countries have shared conditions (1)-(3). Only Japan has experienced a prolonged period of (4) deflation. A closer examination of how Japan got into the Japanization state reveals that it is a combination of (a) a hard-landing of the 1990-92 bubble; (b) not dealing with non-performing loans problem promptly and decisively, resulting in a major banking crisis; (c) the absence of a soft landing after the banking crisis; (d) the lack of quantitative easing policies when deflation first occurred; (e) the absence of an inflation target; and (f) the absence of timely, large scale fiscal stimulus. The fact that Abenomics—a mix of aggressive monetary policy, combined with a 2% inflation target and fiscal stimulus—in lifting the economy out of deflation shows it is possible to prevent or cure Japanization.

JEL-codes: E43 E44 E52 E58 E61 E62 F31 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-fdg and nep-mac
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w21954.pdf (application/pdf)

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:nbr:nberwo:21954

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21954

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-06-19
Handle: RePEc:nbr:nberwo:21954