The Impact Of Japanese Great Recession On Foreign Investment And Relaxed Trade Barriers

1393 Words Feb 15th, 2015 6 Pages
In late 80s Japanese government liberalized the environment of foreign investment and relaxed trade obstacles and gave more freedom in market regulations. However the police remained conservative and it was not seen unless the situation warranted. (Hoshi & Kashyap 2004) The government took a step back and policies became more conservative in nature, with the policies only surfacing when they are absolutely necessary (Hoshi & Kashyap 2004). The economy worsened showing a growth rate of about 2%; and sunk into a period which (Kuttner & Posen 2001) referred to as ‘Japanese Great Recession’.
The supply side opinions for this situation explains: decrease in output growth (Saito 2000); reduced service area performance (Kay & Clark 2005); and a decreasing birth rate meaning an elderly labour force. The Demand Side arguments base their reasons on the external forces which lead to in an appreciation of the Japanese yen compared to the dollar and the resulting defective monetary policy, which lead to in deflation and the formation of a liquidity trick since the 1990s (Tyers 2012).
Korea is ranked the 14th largest economy according to world bank GDP ranking. The scenario was totally different 50 years ago with Korea being poorer than Bolivia. The Korean economy has been able to register annual growth of 7% with banks more efficient than it was during financial crisis of 1990s.

The Korean Government and Central Bank has responded to the crisis timely by taking various steps (Bank of…
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