国际金融作业——安倍经济学.doc

During the global economic recession, Japan suffered a 0.7% loss in real GDP in 2008 followed by a severe 5.2% loss in 2009. In contrast, the data for world real GDP growth was a 3.1% hike in 2008 followed by a 0.7% loss in 2009. As well, exports from Japan shrunk from 746.5 billion in U.S. dollars to 545.3 billion in U.S. dollars from 2008 to 2009, a 27% reduction.
Abenomics is a set of policy measures meant to resolve Japan's macroeconomic problems. It consists of monetary policy, fiscal policy, and economic growthstrategies to encourage private investment. Specific policies include inflation targeting at a 2% annual rate, correction of the excessive yen appreciation, setting negative interest rates, radical quantitative easing, expansion of public investment, buying operations of construction bonds by Bank of Japan (BOJ), and revision of the Bank of Japan Act. Fiscal spending will increase by 2% of GDP, likely raising the deficit to 11.5% of GDP for 2013. In 2012, the National passed the bill to increase the consumption tax rate to 8% in 2014 and 10% in 2015 to balance the national budget, and it is expected that the tax hike will discourage consumption. In 1997 the consumption tax was increased from 3% to 5%, and then deflation started; the nominal GDP growth rate was below zero for most of the 5 years after the tax hike. As of May 2013, it has achieved the depreciation of the yen to 102 yen to a dollar, which was stagnating around 80 in 2012. Also, according to a survey carried out by Nikkei Newspaper in Japan, 74% of the respondents praised the policy in alleviating Japan from the prolonged recession.
In terms of recent economic trends, the unemployment rate of Japan has decreased from 4.0% in the final quarter of 2012 to 3.7% in the first quarter of 2013, continuing a past trend.
Abenomics refers to the economic policies advocated by Shinzō Abe, the current Prime Minister of Japanwho assumed office on 26 December 2012. It’s refers Abe proposed a series of economic policies, currency devaluation as the main body. Abenomics’ Japanese name is made from the word of Abe and economics, which term has been widely used since November 2012.
The new Cabinet headed by Shinzo Abe, president of the Liberal Democratic Party, which won a crushing victory in the general election, came into office on December 26 of last year. During his election campaign, Mr Abe advocated an economic policy for breaking away from deflation that is completely different from previous ones. In response to Mr. Abe’s pronouncements, the yen depreciated, and stock prices rose. It targets a 2% inflation rate, the creation of 600,000 new jobs in two years and a stimulus package valued at ￥20.2 trillion or $210 billion.
Since his election campaign, Prime Minister Abe has advocated a three-pronged macroeconomic policy consisting of bold monetary easing, flexible fiscal policy, and a growth strategy. The three pillars of the policy can be described as follows:
(1) An inflation target to be set by the Bank of Japan, additional quantitative easing, and the launch of a fund to buy foreign government bonds.
(2) Increases in public investments for the long term under a ‘national land strengthening plan,’ and the compilation of a large supplementary budget as the first step.
(3) A growth strategy to enhance the competitiveness of business locations in Japan in terms of taxation and regulations.
With regards to the first pillar, at a Monetary Policy Meeting held on January 22, the Bank of Japan set an inflation target of 2% and brought in an open-ended asset purchasing method. On the same day, the government and the Bank of Japan announced a joint statement regarding overcoming deflation and achieving sustainable economic growth, which indicated the Bank of Japan’s stance of increased cooperation with the government to overcome deflation. With regards to the second pillar, since his election campaign Mr. Abe has advocated 200 trillion yen worth of public works projects over 10 years under what he calls a “national land strengthening plan.” On January 15 the Abe Cabinet approved a supplementary budget for FY2012 of 13.1 trillion yen, the second largest supplementary budget in history, to boost the economy in the current fiscal year and the next fiscal year. Mr. Abe’s economic policies, which have been dubbed “Abenomics,” appeared to focus on making the Bank of Japan set an inflation target to overcome deflation. Mr. Abe even suggested that he has considered revising the Bank of Japan’s Law.
Next, using AADD curve analysis, Mr. Abe may produce the effect of the policy of economics
1. Effects of a Temporary Increase in the Money Supply

By shifting AA1 upward, a temporary increase in the money supply causes currency depreciation and a rise in output.
An increase in the level of money lowers interest rates, causing the domestic currency to depreciate (a rise in E).
• The AA shifts up (right).
• Domestic products are cheaper so that aggregate demand and output increase until new short run equilibrium is achieved.
So It not only can increase the output of Japan, still can make the yen devaluation.
2. Effects of a Temporary Fiscal Expansion

By shifting DD1 to the right, a temporary fiscal expansion causes a currency appreciation and a rise in output.
An increase in government purchases or a decrease in taxes increases aggregate demand and output.
• The DD curve shifts right.
• Higher output increases real money demand,
• thereby increasing interest rates,
• causing the domestic currency to appreciate
So it can increase the output of Japan, but will continue to rise in the yen.
3. Effects of a Permanent Fiscal Expansion

Because a permanent fiscal expansion changes rate expectations, it shifts AA1 leftward as it shifts DD1 to the right. The effect on output is nil if the economy starts in long-run equilibrium. A comparable temporary fiscal expansion, in contrast, would leave the economy at point 3.
A permanent fiscal expansion not only has an immediate impact in the output market but also affects the asset markets through its impact on long-run exchange rate expectations.
A permanent increase in government purchases or reduction in taxes
• increases aggregate demand
• makes people expect a domestic currency appreciation in the short run due to increased aggregate demand, thereby reducing the expected return on foreign currency deposits, making the domestic currency appreciate.
The first effect increases aggregate demand for domestic products, the second effect decreases aggregate demand for domestic products (by making them more expensive).
So it can make the yen depreciate, but there won't be effect on output.
4. Short-Run Effect of a Permanent Increase in the Money Supply

A permanent increase in the money supply has stronger effects on the exchange rate and output than an equal temporary increase.
A permanent increase in the level of the money supply
• Lowers interest rates；
• Makes people expect a future depreciation of the domestic currency, increasing the expected return of foreign currency deposits.
• The domestic currency depreciates more than
• (E rises more than) the case when expectations are constant
• The AA curve shifts up (right) more than the case when expectations are held constant.
So it can make Japan in exchange rate and output two aspects have been improved greatly.
5. Long-Run Adjustment to a Permanent Increase in the Money Supply

The final analysis conclusion，a Permanent Increase in the Money Supply in long-run can make the yen depreciate, but weaker than the short-run effect. And it has no effect on output.
From the current view, Abe has both positive effect in economics, also produced many negative effects.
Positive effects:
From the latest data released by the "economics" Abe of Japan's economy to boost the effect was immediate. On June 10, according to data released by the cabinet office in the first quarter gross domestic product (GDP) growing at an annual rate of 4.1%, higher than previous preliminary forecast of 3.5%.
Other major economic indicators also look very beautiful: may GongKuangYe production index rose by 0.2% in Japan, for the continuous 4 months; Retail sales increased 0.8% year-on-year, it is the first five months year-on-year growth; Compared with the new residential quantity Increased by 14.5%, for nine consecutive months of growth.
On July 1, the bank of Japan enterprise short-term economic observation survey released (boj tankan), according to Japanese manufacturing big business confidence index in June 12 points higher than the previous survey, is also the first time since September 2011 comes as.
The international monetary fund (IMF) in the economic outlook report released on April, Japan's economic growth rate rise to 1.6%.But not long ago, Japan center for economic research predicts that Japan's GDP growth is expected to reach 2.6% for 2013.
So far, "Abe economics" is the most intuitive effect is reflected in the substantial depreciation of the yen and the stock market rose sharply.Since Mr Abe came to power in December last year, the yen rate more than 20%, the stock market rose about 70%.
Japan's exports increased 10.1% year-on-year in May. The yen and a surging stock market value for the Japanese corporate earnings boost effect is obvious, the Tokyo stock exchange listed companies released a plate on fiscal earnings, raised more than seventy percent enterprises operating profits. Benefit from improving, the yen and the American market
Negative effects:
First of all, the ultra-loose monetary policy contributed to the market volatility. On May 23, Tokyo's Nikkei stock index tumbled over thousand points, opened the prelude of the Japanese stock market continuous ups and downs; The bank of Japan through a large number of long-term bond yields expected to buy Treasury bonds down; The yen has obviously mainly by the federal reserve central bank policy and overseas investor psychology influence overseas.
Second, "economics" Abe failed to benefit the small and medium-sized businesses and ordinary people. June "the boj tankan shows that" in the big business confidence is rising at the same time, the small and medium-sized enterprises (smes) confidence index is still wandering in the negative. The rich enjoy the stocks, real estate wealth effect brought about by the appreciation, working-class, not see the possibility of salary increase.
In addition, food, daily necessities, such as import prices rose significantly, increased the cost of doing business for small and medium-sized enterprises and ordinary consumers burden of life.
In conclusion，for the economy to move away from deflation, economic entities in the private sector need to encourage consumption and investment, backed by government policies, and self-sustaining economic growth needs to be achieved. To this end, the growth strategy that the government is expected to hammer out by June next year and the tax reform that the government is working on are very important. I hope that an effective growth strategy will be produced and that the economy will finally end its persistent deflation.