Japanese Recession

The country of Japan has been facing a recession due to many occurring circumstances that have. caused Japan's economy to slowly spiral down, such as many other countries are facing today. On December 8, 2009; Japan's government reached an agreement regarding the financial crisis that the country is facing. and has chosen to put a stimulus package into action. The stimulus package that Japan has put together will have a budget of 7.2 trillion yen (82 billion dollars) to help stimulate the country's decreased employment rate, give incentives for energy efficient products, and help give loans to business owners.

In May 2009, the Japanese government approved a 2 trillion yen stimulus package for weaker and less stable Japanese corporations. In Japan, it is common for the government to assist weaker companies, versus less-common systems such as the American corporate bailouts.

Though Japan's recent recession can not be tied to one single event, analysts believe that one of the leading causes is linked to a 14-year high for the yen compared to the U.S. dollar.

After the September 1985 Plaza Accord, the yen's appreciation hit the export sector hard, reducing economic growth from 4.4 percent in 1985 to 2.9 percent in 1986. The government attempted to offset the stronger yen by drastically easing monetary policy between January 1986 and February 1987. During this period, the Bank of Japan (BOJ) cut the discount rate in half from 5 percent to 2.5 percent. Following the economic stimulus, asset prices in the real estate and stock markets inflated, creating one of the biggest financial bubbles in history. The government responded by tightening monetary policy, raising rates five times, to 6 percent in 1989 and 1990. After these increases, the market collapsed.

The Nikkei stock market index fell more than 60 percent—from a high of 40,000 at the end of 1989 to under 15,000 by 1992. It rose somewhat during the mid-1990s on hopes that the economy would soon recover, but as the economic outlook continued to worsen, share prices again fell. The Nikkei fell below 12,000 by March 2001. Real estate prices also plummeted during the recession—by 80 percent from 1991 to 1998.

The effect that Japan's recession has had on its country has greatly changed their market values on almost all goods as well as their real estate market. However, Japan is not the only country feeling the effect of their recession; some countries such as the United States of America and Britain have lost a large amount of exports being sold to Japan, as well as many imports. Also, many Japanese stocks sold in foreign markets have plummeted due to fear of a total loss to those who have invested in Japan's .

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