1. Brief Review of Lecture 3 on the Eurozone Economy
--Growth remains slow at 1% or less. Outlook has both positive and negative aspects. Eurozone perhaps waiting for more definite news about US and Japan.
-- Debt/GDP still rising but rate of growth slowing in some countries and improving. Lower interest spreads between peripheral countries and Germany. Slightly better ratings on government debt (esp. Greece). Financial sector improving. Fixed Capital and Durable Spending should increase. Reforms being undertaken, some austerity is working.
-- Overall unemployment falling to (11.5%) but long term unemployment actually rising to (6%)
-- Youth unemployment still very bad (near 25%)

2. Great fear of deflation. so far disinflation in Eurozone
Great fear of deflation...so far disinflation in Eurozone. Core inflation still positive but falling (0.7%). Pressure on the ECB to continue to drop interest rates, lower the euro, expand aggregate demand, follow the Fed and Japan’s Abenomics. ECB cannot buy government debt at long maturities like the US since market is small, makes QE difficult. IMF seems to want Eurozone to inflate.
Need to coordinate better fiscal and monetary policy...ECB is a single operator, whereas fiscal policy is among 18 different countries. Strong push for a banking union to unify supervision and stress testing.

3. The Development of the Global Economy
Has Japan Turned the Corner on Its Troubles?

4. Problems with the Japanese Economy
Lecture #4
Problems with the Japanese Economy

5. Note that Japan is Struggling with Deflation and Not Inflation
How is Japan Doing on Growth, Unemployment, and Inflation?
Note that Japan is Struggling with Deflation and Not Inflation

6. Hopefully Japan is showing some improvement – hard to say

7. Japanese growth fell in 1993 and has not really recovered since.
This fall in growth is really remarkable. Why?
A Japanese Economist Discusses

8. Japanese productivity has remained essentially constant at 2005 level.

9. Japanese Manufacturing NOMINAL wages have been flat since 2000
Japanese Manufacturing NOMINAL wages have been flat since This means REAL wages during this period rose only when there was deflation

10. How is Japan doing with respect to unemployment?
Unemployment Rate has been falling monotonically since 2009

13. How is Japan Doing with Respect to Inflation ?
Looks Like Strong Core Inflation has Started. Below is a set of YoY monthly data

14. However, when we look at monthly annualized data, even with tremendous monetary stimulus, inflation has subsided and deflation is occurring again

15. How do we reconcile this data?
Big changes from previous year, small changes in recent months.

16. Where is the Abenomics Money Going?
The Nikkei....Maybe?
Will this asset inflation turn things around for Japan?

18. What are the Dangers of Deflation?
The costs of deflation can be separated into transition costs (moving from an inflationary environment to a deflationary one) and steady state costs (costs that arise once the transition takes place).