Japanese government’s “Low Interest Policy” and its suitability in the global economy EC 521 Takao Ito

“Low Interest Policy”  0.25%  To support a weaker yen and boost exports  To feed corporate profits into the households and boost domestic demand  Not to make borrowing expensive

Quantity Demand 1 Demand 2 Supply Price Supply and Demand model The nationwide core consumer price index is expected to rise Increased consumption

Investment Consumption Product Possibility Frontier model Businesses make necessary investments and the Japanese economy grows fast in the future

The Status Quo  Robust corporate profits had yet to trickle down to wages  Consumer prices remain flat  Consumer spending is weak So, What are problems?

From the Global Economy standpoint  Don’t swallow traditional theories without chewing them  Think about the global economy and its cause and effect on the national economy  Increase interest rates

“High interest rates”  Attract wealth from the rest of the world  Assets of $11.5 trillion increase fast and increase purchasing power  Raise money for businesses in the capital market  Along with advances of IT …

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