Is the fiscal stimulus worked during the Japanese Stagnation in early Research Paper

Is the fiscal remark worked during the Japanese Stagnation in wee 1990 crisis - Research Paper ExampleIndeed, the giving medication introduced several fiscal stimuli, they were, however, not effective enough to bring in back the result that the Japanese delivery had earlier witnessed. Opinions on the effectiveness of the fiscal stimulus split in literature written by economists with some joust that the fiscal stimulus was not self-made and really degraded the economic growth collectable to the crowding out effect while others arguing that the fiscal stimulus prevented worsening of the economy and should therefore be considered successful. In my opinion, however, the fiscal stimulus did not work and the reason for this, in part, is due to the fact that most fiscal stimulus when actually seeed/applied by the Japanese government was seldom close to what the government actually promised to implement/apply. Therefore, the fiscal stimulus failed to work because whatever stimulu s was actually applied was never enough. Following the kinsfolk 1985 Plaza Accord, the Japanese Yen started to appreciate which led to Japans export sector getting badly hit. To counter this appreciation of the Yen, the Bank of Japan drastically eased its monetary policy slighten the interest rate from 5% in January 1986 to 2.5% in February 1987. Soon, the real estate and financial markets began to expand speedily as a result of this monetary easing, creating a huge financial asset bubble. In receipt to this, the government increased its interest rate to 6% in 1989-90. The sudden tightening of the money hang on led the markets to collapse and thus began the onset of a long period of stagnant economic growth in Japan. The real GDP increased from 428,826 one thousand million Yen in 1990 was to a mere 469,480 billion Yen by the end of 2000 (Powell). Statistical evidence of poor performance of fiscal stimulus The interchange about fiscal stimulus and the Japanese 1990s crisis f inds root in the Keynesian economic principles. Keynesian economists preach that during a cyclical public treasury, discretionary fiscal policies can stand by the economy emerge from the trough. That is, when the economy goes down due to cyclical factors, the government by introducing fiscal expansionary policy (applying fiscal stimulus) can help the economy maintain emerge from the downturn faster. The Japanese economy in the 1980s saw fast expansion and large building up of asset bubbles. Accordingly and cyclically, when the bubbles burst, the economy started to cool down. However, this time the trough was not due to a business cyclical downturn the economy had lost steam due to asset bubble burst. Keynesians argue that by applying large fiscal stimulus under such situations, the government can reinvigorate growth. The Japanese government did apply several fiscal stimulus programs but was unfulfilled in spurring growth or controlling other macroeconomic indicators either. ensu re 1 downstairs puts into perspective the state of the Japanese economy during the crisis. It shows the real GDP growth rates for Japan and for the US from 1985 to 2002. Figure 1 Comparison of Real GDP growth in Japan and US from 1985 to 2002 From Figure 1, we see that Japan enjoyed high economic growth from 1985 to 1991 where after the economy was more or less stagnant until 2002 except in 1996 (2.6%) and in 2000 (2.9%) where the economic growth was 2% but still well on a lower floor that of