The value of Japanese Yen domestically is too low...
average wages earning perday in Japan is around 7000 Yen... people are carrying
lots of money even for day to day expenses... In the US daily wages are around
80 $... 100 times less than Japan... Therefore, if we want to increase demand,
inflation and economic-growth in Japan, we will need a very much big stimulus
to affect the threshold for the response we like to see... The US pumped
trillions of dollars through the QE to generate demand, inflation and growth...
And if Japan wants to do to the same it will need a 100 times
bigger stimulus without time horizon commitment because the Japanese economy is
in the liquidity-trap, people are delaying purchases in expectation of lower
prices ahead, monetary-easing will make them delay longer... Any increase in
money supply is supposed to increase wages/income and demand... but, nominal
wages, when value of money is too low, should increase so much (should be big
enough) so that it generates demand and inflation... But, real-wages can rise
when we inflation falls and more when prices go below the base year... The Japanese
economy has left many inflation base years and there is a lot of scope to compress
prices, increase real-wages, demand and growth... Japan should stop avoiding
deflation... Lower prices are more expansionary, Pigou-effect... The
transmission of higher money-supply to inflation and higher interest rate has
broken-down... Liquidity-trap is real...
Subscribe to:
Post Comments (Atom)
-
India's public debt, encompassing the center and state governments, is a significant component of the overall debt landscape, and its ...
-
Employment can be viewed as both a demand variable and a supply variable in the labor market. Businesses, as employers, demand labor to pr... -
The private sector can contribute significantly to increasing demand in the Indian economy through increased productivity and lower prices, ...
No comments:
Post a Comment