1. Sara Hsu

2.  Real estate and stock markets boomed in 1980s, and economic growth was increasingly fueled by financial gains. Loose monetary policy, favorable real estate tax incentives, and financial deregulation all contributed.  Real estate and stock market crash in 1990, coupled with a decline in technological innovation in the real economy, resulted in decline  In the late 1980s, Japan also moved many production processes overseas due to appreciation of yen which made Japanese exports less competitive, and increasing wages, and rising land prices

3.  With bursting of the asset price bubble, banks attempted to wait for recovery, and problem loans mounted  The Japanese government attempted to shore up jusen, suffering non- bank housing loan companies, with capital injections, but this move was highly unpopular  Failure of several important securities companies in 1997 produced increase in financial instability  In response, the government made 30 trillion yen in funds available to the Deposit Insurance Corporation of Japan strengthen bank balance sheets and deposit system.  Asset management company, the Industrial Revitalization Corporation of Japan, was set up by the government in April 2003 in order to purchase higher- quality troubled loans from bank books.  The banking system began to recover thereafter through 2005.

4.  Result of the financial crash was a long period of decline in GDP growth, decline in purchase of luxury goods, and increase in poverty and inequality, including a rise in homelessness.  GDP growth declined due to decreasing productivity and also due to a relatively declining population; “zombie” firms kept in business with support from bank loans in the 1990s put a drag on productivity  Japan was caught in the Asian financial crisis, and was already in an economic slump as two large financial institutions failed in November 1997. Financial system became increasingly fragile as stock prices declined and banks stopped lending. Depreciation of the Japanese yen sped up at end of 1997.

6.  Great Recession also strongly impacted Japan. Japan’s trade and industrial structures had become more globalized, resulting in the collapse of industrial production after the crisis hit. This was because of negative terms- of- trade shock that hit the country in 2008, as well as the sudden increase in energy and other commodity prices. The Japanese stock market also declined through the fall of 2008, and new loans contracted. Manufacturing production collapsed in November 2008 as exports were sharply impacted.

7.  Japanese Prime Ministers focused on a variety of policies to boost economy, including reduction of working hours (Kiichi Miyazawa, 1991–93), fiscal consolidation (Ryutaro Hasimoto, 1996–98), deregulation and privatization (Junichiro Koizumi, 2001–06), and fiscal stimulus (Shinzo Abe, 2012–present, second term). Koizumi was the most in favor of financial reform, requiring banks to disclose and reduce nonperforming loans and privatizing banks that extended loans for political reasons.  The policies at times conflicted with one another, particularly in terms of fiscal spending versus fiscal constraint, and there was much debate over the source of the economic weakness

8.  China is now attempting to move in a different direction, from an export- led, investment- intensive model of growth to a consumption- led model of growth.  Great Recession forced the nation to turn from a manufacturing-focused model of growth to inward sources of growth. The first and most immediate source of growth was fiscal stimulus. A large stimulus package, worth $589 billion, was implemented at the end of 2008, creating many new construction jobs and stimulating consumption. This government spending helped to keep the economy going, but it would not last.  At the same time, a real estate boom was fuelled by non- bank financing and expansion of local government financing vehicles, which were entities that represented local governments, and allowed to borrow to build up properties and infrastructure. The fixed asset investment expansion was permitted by the central government since there were diminishing external sources of growth.

9.  In May 2014, China entered a period of falling real estate asset prices and liquidity shortages, despite its clear agenda to liberalize its financial sector, increase urbanization, and grow its services and technology-intensive manufacturing sectors. China was struggling to maintain its high growth rate. The Chinese leadership stated that the economy was entering a period of slower growth, dubbed the “New Normal.”  The reform agenda laid out in 2013 by the State Council in the Third Plenum Communique aimed to reform the financial sector, state- owned enterprises, fiscal policy, environmental regulation, and rural land use rights. This agenda has been implemented to varying degrees, although changes are slow in coming and major changes have not yet arisen.

10.  India was adversely impacted by the Great Recession that hit in 2008. India was exposed through a reversal of capital inflows, corporate and banking sector borrowings, and trade channels. Global investors sold their holdings in Indian companies to ease liquidity conditions in their home markets. The rupee depreciated by 23 percent in 11 months, increasing dollar liquidity and reducing India’s foreign exchange reserve. However, Indian banks were not directly exposed to toxic assets sold in the United States and Europe, and much of India’s growth has been driven by domestic demand, somewhat reducing the impact of the crisis on India.  However, India’s fiscal stimulus policies in response to the crisis focused on tax cuts and subsidies, without an increase in capital outlays. An attempt to improve public investment infrastructure tapered off after 2010, leading to a decline in growth in manufacturing and infrastructure-oriented sectors. Global conditions remained weak in 2012, with ongoing volatility in financial markets and low levels of external demand. Thisresulted in an investment and growth decline in India.

11.  India’s growth has therefore stagnated, slowing to 4.4% in 2013, the lowest level of growth in a decade. India was plagued by a large current account deficit and high unemployment and inflation rates, but the macroeconomic situation has been gradually improving. It has been pointed out that India’s economy also possesses many positive attributes, such as a high rate of savings, an increasingly skilled workforce, and a strong private sector.  India is attempting to build up its manufacturing sector, having put in place the National Manufacturing Plan to create 100 million new manufacturing jobs within the decade. The plan focuses on creating jobs within India’s domestic manufacturing sector to increase manufacturing’s contribution to GDP.

12.  India’s government, led by the Bharatiya Janata Party (BJP) and headed by Prime Minister Narenda Modi, was elected in May 2014. This government is committed to free market ideals, focusing on reducing bureaucracy and liberalizing trade and foreign investment. The Modi government has undertaken many new reforms, including improving market forces in the gas, coal, and mining, and land sectors, raising taxes on energy products, promoting inclusive finance, and piloting labor reforms in Rajasthan  In addition, India’s “Vision 2022,” laid out in its annual budget, seeks to ensure employment, economic opportunity, housing, electricity, water, sanitation, connectivity, medical facility, and schools for all its people by 2022, the 75th year after independence

13.  Japan, India, and China are currently struggling to revive economic growth. The three economies are in different stages, with Japan’s economy highly developed yet somewhat stagnant, China’s economy attempting to move up the value chain and convert from a manufacturing- based economy to a service- based economy, and India’s economy attempting to continue high levels of growth while placing policy focus on its manufacturing sector.  The three economies all represent clear historical successes, having pulled their populations up to higher standards of living and reduced poverty during the reform processes.