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The Japanese Economy Today Is One Of The Strongest In The World. Both Fiscal And Monetary Policies Have Been Used Throughout The Decades Interfering In The Economy.

1531 words - 6 pages

The Japanese Economy today is one of the strongest in the world. Only the United States has a higher gross national product (GNP). There is a 0% annual growth, and 2% inflation currently while the official currency is the yen. Over the years there have been many different cycles in the Japanese Economy regarding both fiscal and monetary policies. This is seen internally, within the economy of Japan, and in its relationships with other countries including the United States.The history of the economy of Japan has been through many ups and downs over the decades. Before WWI, Japan was a socialist economy. Up to WWII, the country was ruled by an emperor, and after WWII, the economy was a mixed market economy. Today Japan is a socialist country yet is still a mixed market economy. The Japanese economy is usually identified with its changes in fiscal policy. Fiscal policy is relating to government expenditures, revenues and debt incurring budget deficits to stimulate a weak economy. It is those decisions, "usually relating to taxation and government spending with the goals of full employment, price stability, and economic growth," (http://www.investorwords) that cause changes in the fiscal policy at hand.The biggest changes occurred after World War II. "For some years following Japan's defeat in World War II, the nation's economy was almost totally paralyzed from wartime destruction, with severe food shortages, runaway inflation, and rampant black-marketeering," (http://www.geocities). Domestic demand decreased and overseas trade was restricted. Rehabilitation of Japan was possible because of the aid provided by the United States. In 1951, the gross national product was once again at the level it was at in 1934. This was due to the elimination of military spending which at some points in history drained the economy. Even the zaibatsu, large business trusts, were broken up to help ensure a free market. Wages increased due to this change. Not only business were affected by these new rules. Tenant farmers were given land lots, which caused more of an incentive to work their own lands.The economy of Japan soared during the 50's and 60's with a short recession in 1962, and once again in 1965. This was due to the announcement of the 10-year Income-Doubling Plan in 1960. This plan encouraged savings, and aimed at stimulating investment as well as promoting exports. Japan's annual growth rate was 4% before the war, but at the end of the 60's tripled its growth to a close to 12%. At this time the United States had an annual growth rate of 4.3% "The high level of savings of Japanese households provided banks and other financial institutions with ample funds for heavy investment in the private sector," (http://www.geocities). Productivity per worker also increased due to this investment in modern technology.By 1968, negative externalities became apparent. There was less modernization in agriculture and small businesses. Japan had gone corporate with large...

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