japan Harvard Case Solution & Analysis

1)         Japan is recognized for experiments in terms of money ever since its devastating loss at the end of World War II. The Bank of Japan cameup with a grand strategic plan with three building blocks known as three arrows. The purpose of any monetary policy is to reduce real interest rates. However,in Japan's case, it is a noteworthy lateral consequence of diminishing the value of the yen. Therefore, it could be said that Yen is declining.Nonetheless it could be said that the declining rate of Yen can be beneficial for the Japanese economy. The primary operating target for monetary base changed from the collateralize overnight call rate to monetary base. The Bank of Japan conducts money market operations so that there would be a surge of about 60-70 trillion Yen annually at the monetary base. Due to this, this has led to a further decline in the yield curve. With the maturities including 40-year bonds, they would be be available for sale, and the bank’s JGB purchases are expected to be extend for about seven years.Lastly, BOJ is considering the operations related to the supply of funds in order to support financial organizations in disaster areas and substantial compensation for the disaster areas. Haruhiko Kuro do the CEO of Bank of Japan is open to government debt and it would lead to disappointment if the bank fails to acquire the targeted inflation rate and as a result, people would lose confidence.The policies implanted were not much focused on the increase in wages and capital spending. Moreover, these policies did not achieve thegoals in the particular two-year period. The expectations for inflation were high with a few indicators, which strengthened them. There would be long hike of taxes and due to the slumping oil prices; it would reduce the inflation rate.

2)         The Government wanted the BOJ to ease its monetary policy to grow Japan out of deflation. Abe overstretched the Bank of Japan to take up an official inflation target of 2% and to buy bonds in unlimited numbers until it reaches that goal. BOJ's new policies have features of lowering exchange rates and furnishing exports with a major boost. Indeed it could be said that the value of the Yen has deteriorate dramatically. The BOJ is optimistic about providing the environment for companies to invest. On the other hand,this case is invalid, and the money is mislaying its significance in real terms. As a result, the investors will leave by selling out their stocks due to the deterioration of Yen.BOJ was recognized for the first two arrows of Abenomics approach; hyper-easy monetary policy and fiscal spending. However, thein vestors have been disappointed by the collapse of third arrow to goal structural reforms and deregulation of labor and farming sectors. The BOJ's extraordinary easing risks blurred the financing of Abe's government deficits, which would ultimately lead to the prices increasing in Japan. The new policies of Bank of Japan will sanction the primary threats of monetary easing, which will possibly encourage hyperinflation. There is also a concern that Japan's national liability will become indefensible if the interest rates increase. Moreover, the companies will not willingly increase their production if they don't have confidence in the stability of weakening the Yen. Furthermore, deterioration of yen will also reduce the purchasing power of households and shrinks corporate profits.

3)         Japan has a record of little monetary expansion, high public debt, and mild deflation. The Japanese economy is known for its soundness of catastrophe. Japan is the fuel on nonetheless another set of important policies to perk up it, which if successful, could redraft the rules of economic and monetary policy. The Japanese industry is determined enough to recover its economy and maintain its growth. There is a need for change in public and private sectors and to improve fiscal investment and loan curriculum as well. As Japan heavily relies on its exports, therefore there was a need for big investment by encouraging entrepreneurs to start up new businesses, to maintain an environment of enterprises and people to come up with innovations to help Japan grow as a vast nation....................................

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