Japan Agrees to Release a Whopping $116 Billion to Support its Economy

Japan Agrees to Release a Whopping $116 Billion to Support its Economy

01/06/2016 0 Di puntoacapo

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swap-japan-splashJapan Agrees to Release a Whopping $116 Billion to Support its Economy

It is evi­dent that the Japan­ese Gov­ern­ment has been mak­ing efforts to boost its econ­o­my. Accord­ing to the lat­est news, the gov­ern­ment has giv­en its approval to release $116 bil­lion Yen into the economy.

Bei­jing, Chi­na, May 31, 2016 -(Press­Re­lease­Point)- The gov­ern­ment is hop­ing that the extra mon­ey being pushed into the mar­ket will help Japan over­come reces­sion. This mon­ey will be spent on improv­ing infra­struc­ture and busi­ness­es. In the long run, the gov­ern­ment hopes that this will attract more and more investors.
The gov­ern­ment is also hop­ing that this extra mon­ey will lead to the cre­ation of approx­i­mate­ly 600,000 new jobs and will boost the econ­o­my by 2%.
The world has been hit by slowed glob­al demand. This, accom­pa­nied with reduced domes­tic con­sump­tion and exports, has affect­ed the Japan­ese econ­o­my neg­a­tive­ly. The Japan­ese econ­o­my faced con­stant con­trac­tions dur­ing the last two quar­ters and has now gone into recession.
Shin­zo Abe, the Prime Min­is­ter of Japan, put blame on the pre­vi­ous gov­ern­ment. Talk­ing to a group of jour­nal­ists, the Prime Min­is­ter said that Japan is today in a state of reces­sion because the pre­vi­ous admin­is­tra­tion failed to boost the econ­o­my and cre­ate growth. He fur­ther said that to fight the cur­rent sce­nario, Japan must design a strat­e­gy that focus­es on cre­at­ing jobs and raise incomes. This is the only way to achieve sus­tain­able growth in Japan.
The mon­ey that the Japan­ese gov­ern­ment is releas­ing will be used to rebuild areas destroyed by the earth­quake and tsuna­mi of 2011 and sup­port region­al economies. It will also be used for pro­mot­ing edu­ca­tion and social security.
Yen has been declining
The Prime Min­is­ter of Japan has promised to take effi­cient mea­sures to bring the Japan­ese econ­o­my back on track. One of the first things that the Japan­ese gov­ern­ment plans to do is to make Yen fall in value.
Finan­cial ana­lysts are of the opin­ion that a weak­ened Yen will affect the exports pos­i­tive­ly. Once the Yen deval­ues, the price of Japan­ese prod­ucts will also reduce for for­eign buy­ers. This will lead to an increase in exports. Not just that, Japan­ese exporters will help pull the econ­o­my out of stag­na­tion by putting their extra earn­ings back into the Japan­ese markets.
For­tu­nate­ly, since last Novem­ber, the Yen has already dropped by 12% against the Dol­lar. On Fri­day, it mea­sured 88.97 per dollar.
In a recent state­ment, the gov­ern­ment clar­i­fied that it has been keep­ing an eye on the Yen and will inter­vene if need be.
In oth­er good news, Japan­ese share prices have gone up. This has led the Nikkei 225 to gain 1.4%.
Japan has been fight­ing defla­tion and stag­nan­cy for many years now. All efforts of Japan­ese pol­i­cy-mak­ers to pull the econ­o­my out of defla­tion have failed in the past. The gov­ern­ment hopes that the $116 bil­lion stim­u­lus being pushed into the Japan­ese econ­o­my will punc­ture deflation.
Michael Lane, Glob­al Co-Head of the Invest­ment Man­age­ment Divi­sion at Shizuo­ka Cap­i­tal Wealth Man­age­ment says,” Until now, what­ev­er mea­sures the gov­ern­ment has tak­en, have been aimed at kick-start­ing the econ­o­my. At this point, the gov­ern­ment needs to think beyond that.”
Japan has been hit by low demand from its three key mar­kets — US, Euro­zone and Chi­na. While demand from the US and the Euro­zone has declined as these two zones are strug­gling with their own economies, a decline in demand from Chi­na has occurred due to Japan’s ter­ri­to­r­i­al dis­pute with the Chi­na. These fac­tors have direct­ly affect­ed Japan’s exports and economy.
Japan’s ter­ri­to­r­i­al dis­pute with Chi­na has hit the coun­try espe­cial­ly hard­er. Chi­na is one of the biggest trad­ing part­ners of Japan. It is also one of the fastest grow­ing con­sumer mar­kets. At this point, Japan can­not afford to offend China.
If Japan wants to take the road going towards eco­nom­ic growth, it must work on its rela­tions with Chi­na. The econ­o­mists have already pre­dict­ed that the US and Euro­zone will take a while to come out of the finan­cial cri­sis that has hit them. In such a sit­u­a­tion, Chi­na can play a piv­otal role in improv­ing Japan’s exports and its econ­o­my.Lane says, “If Japan wants to take the road going towards eco­nom­ic growth, it must work on its rela­tions with Chi­na. The econ­o­mists have already pre­dict­ed that the US and Euro­zone will take a while to come out of the finan­cial cri­sis that has hit them. In such a sit­u­a­tion, Chi­na can play a piv­otal role in improv­ing Japan’s exports and its econ­o­my.
Lane fur­ther added, “Oth­er than work­ing on its rela­tions with Chi­na, Japan needs to make fur­ther efforts to improve its econ­o­my. If Japan wants to fight reces­sion, it must attract the atten­tion of glob­al investors across the world. To achieve this, the coun­try will have to start by spend­ing on key areas like health­care, retail, con­struc­tion and agriculture.”