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Home Publications Blogs Beat the Press Japan's Weak Economic Growth Could be Due to Failed Macroeconomic Policy

Japan's Weak Economic Growth Could be Due to Failed Macroeconomic Policy

Thursday, 17 January 2013 05:29

A NYT article that reported on the surge in college education in China told readers, "Japan’s experience shows that having more graduates does not guarantee entrepreneurial creativity," referring to the growth slowdown of the last two decades. While it is possible that a lack of innovation is a factor in this slowdown, it is far from obvious that this is the case. Japan does still have a large trade surplus with the United States, suggesting that U.S. consumers like the things produced in Japan more than Japanese consumers like the things produced in the United States.

It is also very plausible that Japan's weak growth is attributable to inept economic policy. Deficit scolds of the sort that dominate U.S. policy debate have restrained the government from running larger deficits even though its ratio of interest payments to GDP is less than 1.0 percent and it remains plagued by deflation. It is rather presumptuous to assert that a failure of innovation is a major problem in this context when no evidence is presented to support this contention.

Comments (3)Add Comment
written by watermelonpunch, January 17, 2013 5:07
One of Ms. Zhang’s two younger brothers — China’s one-child policy is less rigorously enforced in rural areas — is a sophomore studying international trade at Tongji University,

Makes it sound like Ms. Zhang's parents were breaking the law because China wasn't bothering to hunt violators down in the country to fine them... But I believe that rural families where the 1st born was a daughter were exempt from one child only...
That's not a lack of enforcement, that's a lack of violation.
Japan a la MMT
written by Benedict@Large, January 17, 2013 6:06
Japan's problem is pretty simple. The Japanese have unmet savings desires, and their government simply refuses to create enough new money to meet them. Only when these savings desires are met will the Japanese re-open their wallets up to consumerism.
written by Procopius, January 18, 2013 12:11
I'm a little surprised I haven't seen anhone mention a point I saw several years ago. Although Japan tried fiscal stimulus, the Bank of Japan had a target of 0% inflation. Every time their inflation rate went above 0%, they tightened the money supply again. Something like our Fed with it's 2% "target," which they actually treat as a ceiling. Looks like Abe has figured out he has to stop the BOJ from doing that again.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.