Japan's Policy Trap
Subtitle: Dollars, Deflation, and the Crisis of Japanese Finance
Publisher: Brookings Institution Press
Published: September 1, 2002
Language: eng
Format: Hardcover
Number of pages: 294
ISBN-13: 9780815702221
Subjects: Political economy; Public Policy - Economic Policy; International - Economics; Business / Economics / Finance; Political Science; Politics/International Relations; Japan; Balance of trade; 1989-; Economic conditions; Foreign economic relations; Political culture
First sentence: As Japan enters its twelfth consecutive year of economic stagnation, it has begun to dawn on the world that something peculiar is going on.
Description: "Until quite recently, the Japanese inspired a kind of puzzled awe. They had pulled themselves together from the ruin of war, built at breakneck speed a formidable array of export champions, and emerged as the world's number-two economy and largest net creditor nation. And they did it by flouting every rule of economic orthodoxy.".

"Mikuni and Murphy trace the origins of Japan's policy trap far back into history, in the measures taken by Japan's officials to preserve their economic independence in what they saw as a hostile world. Mobilizing every resource to accumulate precious dollars, the authorities eventually found themselves coping with a hoard they could neither use nor exchange.

To counteract the deflationary impact, Japanese authorities resorted to the creation of yen liabilities unrelated to production via the largest financial bubble in history. The bursting of that bubble was followed by massive public works spending that has resulted in an explosion in public sector debt.".

"Japan's Policy Trap points to the likelihood that Japan will run out of ways to support its vast pile of dollar claims. Should the day come when those claims can no longer be supported, the world could see a horrific deflationary spiral in Japan, a crash in the global value of the dollar, or both. The effects would reach far beyond Japans borders.

Mikuni and Murphy suggest that a reduction in Japan's surplus must be accompanied by a reduction in deficits somewhere else - most obviously through far-reaching shifts in the American economy."--BOOK JACKET.