Japan's exports rate last month at the fastest annual rate in more than two years. The weaker yen also boosted the energy heavy import bill, although the rose 10 per cent from a year earlier, economists said the net effect of the yen's retreat remained positive, because higher export revenues translate into higher exporter earnings and consequently more investment and worker's bonuses.
Japan’s stock market is heavy on exporting, The Prime Minister Abe's government also hopes that the export windfall will shore up general business and consumer confidence. This is way to aim to pull Japan out of its liquidity trap and end nearly two decades of economic stagnation and deflation.
This essay will discuss about background and …show more content…
After printing, the quantity of money will increase, so its value will be decreased. (D. Potts, 2013). Increased quantity of money causes decrease of Nominal Interest Rate. It means Japanese people will not save their money anymore and start spending money.
In figure 3.1, previous equilibrium interest rate was E1. After printing money, because of increased quantity of money, equilibrium interest rate moved to E2. Thus, nominal interest rate also decreased from R1 to R2.
Spending much money to Japanese market brings benefits for firms and society. For example, if people start to enjoy shopping especially, clothes. The firm which produces clothes will increase supplying. For increase supplying, they need more labor for increase productivity. So, they will hire more employees.
In firm’s case, because of low interest rate, they are able to earn money in low interest rate. So, they can invest and develop more. Lower interest rate is actually no good news for people however, at government side, it is very effective way to stimuli Japanese market. Actually, in this policy, there is a purpose which takes wealth from elderly and gives it to youth. Older people saved a huge amount of money, it was one of the reasons Japan met economic recession. Therefore, Minister Abe tried to circulate money in Japanese market and he noticed that wealth should be moved to youth.
IV. Side Effects