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1. Introduction
After world war ii Japan's economy due to inflation and unemployment of the
complete collapse, but it is in a short span of ten years back to the highest level
before world war II, in 1990 become the world's second-largest economy,
people have come to call Japan's post-war economic miracle, but over the next
20 years, the Japanese economy is experiencing a long recession and
suffering from deflation, the ups and downs like on a roller coaster, This essay
is analysis of what happened to the Japanese economy during this period and
what policies did the Japanese government implement to change the currently
status
News” Japan’s Economic Roller Coaster Is Headed for Another Dip-Toru
Fujioka
After three years of Abenomics and record monetary stimulus from
the central bank, Japan’s economy still can’t escape a roller-coaster
cycle of expansion and contraction.
In a roller-coaster cycle, where is the dip there always have risen period. We
can start from japan post-war recovery period.
2. Post war recovery Economy growing in japan on 1950- 1989
Supreme Commander for the Allied Powers has played an import role within
this period. Japan no need pay much concern in military aspect its good for
focus on economy recovery and development.
2.1 Korean war
During 1950-1953 Korean War was broken, After the UN entered the Korean
War, Japan became the principal supply depot for UN forces, and hence japan
received a lot of demand for military supplies, The U.S. government, in
particular, is paying a huge amount of special procurement.it lead the japan
heavy industry recovering at an alarming rate.
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As in ASAD diagram shows, during the Korean
War, with the demand of military supplies increase
then the social aggregate demand shift to right from
AD1 to AD2, cross with the LRAS to achieve the
increase of GDP.
Durng this period, the war has motive the Japan's
factories, transport authorities, and the labor force.
On July 31, the U.S. army ordered 1,000 trucks from Toyota, and 3679 trucks
were ordered from Toyota on March 1, 1951. <The story of Toyota's 20 years of
history> is chronicled in this history: "my company was able to get out of the
crisis because of orders from the U.S. army.( Haruki Wada, The Korean
war,1995)
While Japan's economy took off, its financial policies were manipulated by the
United States, setting the stage for a recession in the 1990s
2.2 Japan Olympic Games
Japan quickly recovered after the war and tried to host the 1960 Olympic
Games in 1955, but was defeated by the Italian roma, however it win the 1964
Olympic Games host in 1959.
During the pre-games year, japan government spent $3 billion to build
stadiums and attached project, such as transportation and water systems.
Especially the japan railway system (shinkansen), Shinkansen has greatly
contributed to the development of Japan's economy and its influence till today.
Below are some influences of government investment.
⚫ Large amount of construction equipment and raw material demands.
⚫ Create more jobs
⚫ promote urbanization and increase the labor force
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⚫ Stimulate tourism and consumption
⚫ The multiplier ratio increase to 2.18-2.33(data from Japan's economic
planning agency 日本經濟企劃廳)
In 1990, japan become to world second largest economy.
After High speed economy growing period, Japan's economic environment is
maturing and Transition to a stable extended period. It until the year 1985, a
big event change the japan economy, Japan ended 30 years of economic
growth and Stop growth even drop to recession. People named it to plaza
accord
2.3 Plaza accord
Since 1980, the U.S. government has raise the interest rate in order to improve
the domestic international capital to economic development, large inflows of
foreign capital strengthening dollar, American exports become less competitive
and it expand foreign trade deficit in the crisis. Under the pressure of the
economic crisis, the United States is hoping to devalue the dollar to make
American products more competitive.
On September 22, 1985, the United States, Japan, federal republic of
Germany, France and Britain's finance ministers and central bank governors
(G5) held a meeting, five governments joint to intervene in currency markets,
the induction of the dollar against major currencies exchange rate devaluation
orderly, in order to solve the problem of huge U.S. trade deficit. The agreement
was called the plaza accord because the agreement was signed in the New
York plaza hotel.
In September 1985, the US dollar exchange rate to Japanese yen is around $1
to ￥250 , less than three months after signing the agreement, rapid
appreciation of the yen against the dollar to around 200 yen per dollar, rose
20%.
After the plaza accord, the yen rose sharply, making a significant impact on
Japan's export-driven industries. Hence the Japanese government has made a
strategic adjustment to the export-led growth to domestic demand growth
⚫ Monetary easing
In order to motive domestic demand and encourage consumption and
investment, Japan implemented low interest rates and the official discount rate
was at a low of 2.5 per cent. Low interest rates undermine the bank's appeal to
deposits and turn savings into investment.
