The World Is Becoming Japanese By Milena Radz, Michael Prizant, Joshua Ronai, and Kevin Ordonez Section A Group F

What Does This Mean? Everyone is battling through the effects of a recession. No one knows what to do anymore, and is turning to alternative monetary policy in order to stay afloat. As a result, national economies have become more stagnant due to relatively near- sighted decisions. Japan started it, and the rest of the world is starting to follow.

Monetary Policy Processes and plans that are drafted and implemented by some monetary authority of a country Mandated to increase GDP, decrease unemployment, maintain foreign exchange, and maintain inflation Generally 3 tools used Open Market Operations: Buying/selling short term bonds to add money to the banking system Interest Rates: Rates that act as collateral for a bond or loan a bank takes Reserve Requirements: Funds banks must maintain to meet their liabilities 2 Types: Expansionary: Aim of increasing economic growth and activity in a recessionary phase Contractionary: Aim of decreasing economic growth and activity in a recessionary gap

Unconventional Monetary Policy Generally used to aid in resolving financial crises “Expansionary” Zero Interest-Rate Policy Interest Rates fall to around zero percent Quantitative Easing Purchasing large amounts of bonds in order to encourage lending and investment Though these can help save an economy, there is also a lot of potential risk Liquidity Traps Stagflation

Why Does Anyone Care? Japan, Europe, and the United States have all resorted to ZIRP Japan: Set all interest rates to zero percent in 1990s amidst Housing Bubble Europe: Severely lowered interest rates during Euro Crisis United States: Used ZIRP as one of several tactics to combat the Great Recession All of them are still doing it and have yet to pull out Source: https://www.bis.org/review/r171020d.htm

Glimpse Into the Future declining population & workforce elderly on the rise enormous government debt Japan General Government Gross Debt to GDP is going to be about 249% which is about twice the amount of U.S.’s which is at 108% https://www.economist.com/finance-and-economics/2013/05/04/dont-mention-the-debt

Nation’s Aging & Labor Force “half of Japanese children born in 2007 are expected live to 107” birth rates have declined total fertility rate 1.4 compared with an OECD average of 1.7 “labor force will drop 25% by 2050” efforts to reduce the debt would cause more problems limited immigration to preserve the country’s identity 1.9 percent of foreign residents

What does turning Japanese mean? References how Japan’s growth has become stagnant Lots of modern countries (Europeans, the US and China) are starting to experience a slower growth in their GDP’s This leads to a fear that they will become a stagnant economy, something that is inherently bad Bc Japan was the first large country to become stagnant (~20+ish years now) the phenomenon of countries economies slowing down is labelled after them Bad because there should always be growth Japan has lots of dept, but is kept afloat by the large amount of savings that its citizens have EU and US citizens don’t have nearly that much

Japan vs Europe Massive economic difference between Northern and Southern Europe Southern countries have large amounts of unemployment + not much growth Northern countries have experienced massive growth BC of the eurozone, it makes it so that all countries are actually hurt not helped Japan never hit by the massive unemployment Have always had good employment, so never hurt by that Japanese economy is starting to make a comeback Europe had to deal with the refugee crisis, Japan didn’t Lots of money invested into dealing with the refugee crisis Hurt their economy Not much to show for it Japan didn’t have to deal with that bc of how highly nationalistic it is Immigrants to japan are rare, and they don’t accept in refugees

Japan V.S Europe pt2 Japan has had very slow - and oftentimes negative - growth Shows growth over the last 3ish years https://tradingeconomics.com/japan/gdp-growth EU has been growing at a larger rate over time Is now starting to slow 2.9% -> 1.4% https://tradingeconomics.com/european-union/gdp-annual-growth-rate

Japan vs the United States US economy is starting to slow down, but has the potential to grow more Grew only 2.1% in the most recent quarter Causing an interest rate cut Japan’s economy has grown very little, and is expected to slow down Only ~.5% growth over the past quarter Our economy is still stronger overall, with more exports, higher GDP, and higher GDP per Capita

There is some change happening Small signs that Japan is starting to come back Major Saudi-Arabian oil company listed its stocks in Tokyo Major boost - only 5 foreign companies listed there Tokyo has been out of sight + mind for a bit Difficult to say in the long term, though