Ib Economic Hl Commentary Essay
If cost-push inflation is applied, it will worsen the problem of sluggishness in …show more content…
Japan is depending upon the export strength to support production. The export in this country is high because the level of yen toward other currencies is weak (line 42). Japan could achieve balance of payment surplus because their export is greater than import.
Japanese government tends to let the system of their exchange rate to float freely in the past two years (line 46). Japan interest rate is the lowest in the world with only 0.25% (line 50). The advantage of having low rate of interest is that it will encourage investment. But, the setback is lesser people prefer to save their money in Japan. Japanese government should intervene to stabilize their exchange rate to make it appreciate towards other currencies by increasing the rate of domestic interest rate. If the rate of domestic interest rate is high, it will encourage the Japanese to save their money in Japan. However, Japanese government should be able to ensure both local and foreign investor about the future investment in Japan. Conversely, Government should concern about excessive fluctuating exchange rates problem because it