Japan $Nikkei 225 Exchange Traded Fund(NTETF)$ is a country that experienced an economic miracle post WWII till the end of the cold war, becoming the world's second largest economy for a brief period of time. This was due to Japan's shift in economic policies which encompassed the refocusing of it's economy to an export oriented one. More exports, more demand for JPY, increased foreign reserves, increased currency strength, increased SOL and increased investment. All the necessary ingredients for a successful economy.
However, Japan has in recent years experienced a slowdown in the economy, due to a set of challenges very specific to the country itself. Foremost among these challenges is the demographic shift towards an aging population, presenting implications for the labor force and societal structures. A rapidly ageing workforce presents a problem due to a fall in labour supply. Government revenue would also have to be increasingly spent on non-revenue generating sectors, such as healthcare. As talent pool shrinks, the ability for companies to expand also falls, labour efficiency also decreases and innovation stalls.
On the monetary policy side of the house, the economic toolkit employed by Japan includes unconventional monetary policies, such as ultra-low interest rates, sometimes even negative interest rates (depositing cash in the bank yields negative returns!) and quantitative easing, enacted by the Bank of Japan. This is due to Japan's high marginal propensity to save, resulting in a small multiplier effect. The smaller the multiplier, the slower the economic growth, and thus to encourage spending, a negative return on savings was instituted for a period of time in 2016. Despite these measures, achieving sustained inflation has proven challenging, and deflationary pressures persist, as demonstrated by the stagnating GDP.
Externally, Japan's export-oriented economy has been subject to much global economic uncertainties, trade tensions, and the disruptive impact of the COVID-19 pandemic. Japanese exports has remained rather depressed, falling from a high about 20 years ago.
In response to these challenges, Japan has embarked on initiatives aimed at stimulating innovation, fostering entrepreneurship, and implementing structural reforms. These endeavors signal a recognition of the need for adaptive measures to address long-standing issues and promote sustainable economic growth. However, it is my opinion that without a reversal in Japanese demographic outlook, the economy would only continue to trend downwards. Reversing this would likely require a innovative approach targeting the psyche of the japanese people, as well as social policies to encourage population growth.
@CaptainTiger @Tiger_Academy @Tiger_comments @MillionaireTiger @TigerWire @TigerStars
Modify on 2023-11-22 13:17
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