Jap The World 's Most Powerful Economies Essay example

1035 Words Sep 9th, 2015 null Page
In the 1980s, Japan was largely viewed as the world’s most powerful economies. Their economy exploded after three decades of growth, and they had risen to become the world’s second largest economy. Japanese companies were eliminating American industries, from automobiles to consumer electronics. Also, Japanese companies were purchasing assets in the United States, like movie studios, golf courses, and real estate. Their stock market, Nikkei, was booming during that year. Property prices had increased so much that one square mile of Tokyo was worth more than America. However, due to its rapid growth, their economy went into a recession. The stock market collapsed and prices rapidly increased. Consumers were reducing their spending as demand was down. As of today, their economy is not the same as in 1989, and they are trapped in deflation for over two decades. Consumers and businesses assume prices will be lower tomorrow so they put off spending until tomorrow. This behavior causes demand to go down and prices decrease in order to get consumers to spend. In contrast, consumers speculate the prices will fall in the future, so the demand continues to decline. Additionally, businesses would reduce employment and cut wages and salaries. This causes a negative cycle that would affect the economy of Japan, and limiting their ability to grow in the future.

There are many things that other countries can learn and avoid from Japan. Other countries should not expand too quickly…

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