Saturday, December 27, 2014

Japan should stop stimulizing its economy...



Low economic activity and growth-rate is Japan’s real problem and not unemployment... Therefore, if it is not unemployment, it must not be a demand-problem... because people are employed... unemployment in Japan is near the natural-rate... Japan is a developed economy and its people’s income must be highest among its counterparts elsewhere in the World, but, not sure about real-wages, lower prices will help... So if it is not a demand-problem then it must be the supply-side... And, i would not completely disagree that it is a glut...  ‘coz when the central-bank and the government is committing a stimulus, suppliers begin expecting high demand ahead and they are supplying more which has put the economy in a deflationary-liquidity trap because in liquidity-trap people delay purchases that set the economy in a deflationary spiral... Suppliers see low-interest-rate as a signal for investment, they are supplying more and when the economy is in deflationary-liquidity-trap, lower-prices make suppliers expect that demand will go up... they are supplying more... more supply means lower-prices ahead... Japan should stop using stimulus in order to boost income, demand and growth... Its labour-market is cleared and must clear the Goods market... No matter from where Japan started, now, it does not have unemployment-problem... lower-prices help clear-market... No matter how hard you try to achieve inflation/profits but at Zero-Lower-Bound it would not work...

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