Analysis of the Business Environment Essay Example | Topics and Well Written Essays - 3500 words

Analysis of the Business Environment - Essay Example The daring steps in the formulation of the monetary policy have been taken in order to contain the deflation in the country. Despite the continuous efforts of the government the yield of the bonds issued by the government of Japan has remained more or less static and low. On the other hand the net public debt of the economy of Japan is as high as 134 % of the GDP. This is one of the highest levels of public debt out of the advanced economies of the world. In such a situation the Abenomics policies of 2013 to bring about a surge in the growth rate of the country and to bring about inflation in the country is considered to be having a lot of uncertainty and is dependent on the proper implementation of the strategies. This report is an analysis of the key measures under the policies, the main objectives as well as the long term implications of the policy. Scholarly resources have been consulted extensively in order to conduct the research and to draw appropriate inferences. Discussion B ackground of the Japanese economy In the post world war period Japan experienced spectacular growth of the economy. During the 1960s, 1970s and 1980s the average rate of the economy had been 10%, 5% and 4% respectively. The country moved to being one of the advanced economies. However, Japan witnessed a burst in the assets bubble in the early 1990s. There was an economic slowdown which resulted in a high level of unemployment in the country. Adding to this there was a huge amount of deficit in the budget which occurred due to the ventures of the government to finance the projects related to public works in the country. However the stagnation in the economy could in no way be stimulated by the different infrastructure projects. In order to battle such an economic situation the Japanese government took policy measures that would take out the speculative part of the surplus liquidity from the stock markets as well as the real estate markets. These policies led the country into a phase of intensive deflation during the phase of 1990 to 2004 (Arslanalp and Lam, 2013, pp. 12-16). Due to the policies the economy recovered once again but the deflation still persisted. At the time of the financial crisis which had hit almost all the countries of the world, Japan experienced a loss in the level of GDP by 0.7% in the year 2008 and about 5.2% in the year 2009. On the other hand the growth rate of GDP of the country was negative in 2009. The volume of international trade in the country also suffered a decline of 27%. Key policies under Abenomics The policies under Abenomics comprise of mainly three strategies which are better known as the â€Å"three arrows† (Itoh, 2013, pp. 2-3). The three pillars are Bold monetary policy Flexibility in the Fiscal Policy Strategy to induce growth The Prime Minister intended to take a bold monetary policy through the introduction of quantitative easing as well as increasing the level of spending on the public expenditure along with the attempt to devalue yen. The Bank of Japan intended to undertake a strategy of Quantitative Easing through this policy. The bank would be buying assets from the open market worth $ 1.4 trillion so that the money