• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Japan Increases Export Despite Downturn

Extracts from this document...

Introduction

The main reasons for the decline in Japan's domestic demand is because of the global recession and the worsened expectations about the economic future, as seen in Fig.1 and Fig.2. The recession in Japan has caused the unemployment rate to rise up to 4.4% in February. As more people are unemployed in Japan, there will be a decrease in consumption, which is one of the components of aggregate demand1, shifting the demand curve from AD to AD2, as seen in Fig.1; consequently, the aggregate demand in Japan's domestic market will also decrease. The vertical axis measures deflation and it tells us that Japan is currently facing deflation2, which is caused by a decrease of domestic demand. Another factor that may have affected consumption of domestic goods and services is that the Japanese consumers have adopted "a stark frugality during the years of economic stagnation" and it is "darkening the prospects of many companies". ...read more.

Middle

Even though the government is still trying to stimulate demand in the long run by using intervention methods such as economic packages, but it is to no effect when "household spending has continued to decline". A combination of all of these factors will put Japan into the position of the trough phase of its typical business cycle. There is a negative output gap, "deflationary gap", where the economy is producing below its potential output. This is due to the unemployment issue that Japan faces and how the Japanese companies are lowering supply in the domestic market when they "just don't see a future in the domestic market". As a result of the overall decline in domestic consumption, local Japanese firms are all not very confident about the future of the economy. ...read more.

Conclusion

In conclusion, the Japanese's economy is failing even "as the government pumps money into the economy"; this shows that the stimulus packages are not effective enough to pull Japan out of the trough phase given the high unemployment and the worsened expectations of the consumers. Additionally, since companies are investing into foreign markets, the aggregate supply in Japan is lowered.i 1. Aggregate demand is the total spending on goods and services in a period of time at a given price level 2. Deflation is the decrease in the general price level of goods and services 3. Aggregate supply is the total amount of goods and services that all industries in the economy will produce at a every given level ECON HL 002162-106 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Japan experiencing economic downturn IB coursework

    Y1 is beyond full employment equilibrium and can only be sustained if stocks are run down and labour is willing to work overtime. In the longer term as stocks are depleted and wages rise (thereby increasing business costs) supply will be cut back to a full employment level.

  2. The future of Eli Lilly

    Ranbaxy was a perfect fit, because of its size on the local market. At last, internal agreement on these issues must have been obtained by each of the partners. This is also the case with the Eli Lilly Ranbaxy. Therefore the Joint Venture fulfils these basic assumptions for a partnership.

  1. Economics HL - IA

    As a conclusion, the negative externality created from C02 emissions, has to be internalized, in order to make the market efficient and remove the extra cost on society. Several countries have taken the step toward this by signing the Kyoto Protocol.

  2. Government spending in the downturn may serve to prop up aggregate demand, but the ...

    Both of these actions have problems: --By cutting budgets across the board, productive and useful projects will be cut along with wasteful and inefficient ones.

  1. Commentary -Germany's unemployment rate rose to 8.6% in March as the global economic downturn ...

    The working population are those who are registered as available for employment. Permanent unemployment is a type of unemployment where the market is in disequilibrium; there are fewer jobs available than there are people who want them. One of the ways to deal with this is the classical view where there is excess aggregate supply (AS)

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    What were the causes of the Great Depression? Why or how did we manage to avoid it during the 2007-10 period? When the economy is driven by day-to-day decisions made by human beings we find an inevitability of bubbles, crashes, or recessions.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work