After the Second World War, Japan, as a defeated country, has been maintained in the international monetary system established by the victorious countries "Bretton Woods system", which at that time was a fixed exchange rate of 1 U.S. dollar to 360 yen. After a period of economic recovery (1949-1954), Japan established the strategic goal of "catching up with and surpassing Europe and the United States," and adopted the tactic of "export-investment-led high-speed growth," finally realizing an average growth rate of 10% per year. Japan finally achieved a "miraculous high growth rate" of 10% per year (1955-1973). At the same time, Japan's wholesale prices managed to maintain an average annual rate of increase of 1% during this period, which caused surprise overseas.
It is this continuous maintenance of nearly 22 years of fixed exchange rate greatly contributed to the development of the Japanese economy, so that Japanese enterprises can not pay attention to exchange rate changes for a long period of time, to focus all the attention on improving labor productivity, improving product quality and expanding the export of products, and ultimately make the Japanese industry to return to the international market opportunities. As a result, the foreign trade dependence of Japan's national economy increased rapidly from 12.3% in 1946-1950 to 23.4% in 1956-1960.
After the 1960s, the international competitiveness of Japan's export industry greatly improved, and export trade increased dramatically. According to statistics, 1961-1965, the average annual growth rate of Japan's total exports was 17.9%, 1966-1970 for 15.1%, almost twice the growth rate of world trade in the same period. 1965, Japan's exports and imports to the United States accounted for 28.3% and 25% of Japan's total foreign trade, and the first surplus. In 1966, Japan's GNP exceeded that of Britain, and in 1967 it exceeded that of France. In the "Izanami boom" in 1968, Japan's current account in the exchange rate of 1 U.S. dollar to 360 yen, there is a "long-term black letter", the size of the GNP also exceeded Germany, reached the world's second largest. 1970, Japan's automobile production and the 1960 compared to 10 times. In 1970, Japan's automobile production compared to 1960 increased more than 10 times, becoming the world's third largest automobile exporter. 1971, Japan's ordinary steel, hot-rolled sheet and cold-rolled steel costs were only equivalent to the United States during the same period of 56% of the cost of steel, respectively, 70% and 68%. Japan's steel and automobile industry, the level of international competitiveness of the two industries marked Japan's "catch-up industrialization" has been completed. Japan's foreign exchange reserves began to increase substantially, Japan finally entered the ranks of the "advanced countries".
Japan's long-term black letter that means the main trading country, the United States, the deficit increased, the amount of gold will be exchanged increased. 1968, the United States foreign exports of 34 billion U.S. dollars, a deficit of 1.7 billion U.S. dollars. The United States in order to reduce the trade deficit, to avoid a large outflow of gold, again and again asked foreign currencies, especially the yen against the dollar appreciation. However, Japan did not pay attention.
On August 15, 1971, on the 26th anniversary of Japan's surrender, U.S. President Richard Nixon unilaterally announced that he would stop exchanging the dollar for gold, forcing Japan and the advanced countries of Western Europe to raise the exchange rate against the dollar. This was the so-called "Nixon Shock". Immediately after that, in December of the same year, the finance ministers of ten Western countries held a meeting at the Smithsonian Museum in Washington, D.C., and decided to raise the exchange rate of the Japanese yen by 16.88% to 308 yen per US dollar, which was used as the benchmark exchange rate, and could be floated up and down by 2.25%. With the "Smithsonian Agreement" as the starting point, Japan continued to switch from a fixed exchange rate system to a floating exchange rate system. Japan is regarded as the authority to adhere to the "Bretton Woods system" was unilaterally abandoned by the United States. It is generally believed that this was the first stage in the appreciation of the yen. In the year of the "Nixon Shock", Japan's economy was in recession, and the growth rate was reduced from 10.2% in the previous year to 4.3%. But in the fixed exchange rate system, the Japanese economic strength of the long-term black letter is not as fragile as people think. Japan did not fall into the Great Depression after the yen appreciated by 16.88%. The boom began to rebound after reaching the bottom in the period of January-March 1972. the growth rate of Japan's exports in 1972 remained at the level of 19%, and the trade surplus reached 5.1 billion U.S. dollars.
Thereafter, as the U.S. trade deficit continued to expand, the dollar exchange rate still continued to decline, in February 1973, the United States announced that the dollar depreciation of 10% against gold, Japan also had to let the yen to the transition to a floating exchange rate system. Thus the yen appreciation into the second stage. It can be said that Japan by the fixed exchange rate to the floating exchange rate, is not their own wish. The transition of the yen from a fixed exchange rate system to a floating exchange rate system was realized only after Japan became the second largest economy in the world. And by the first half of the 1970s, Japan's industry has reached the international advanced level, which is Japan has the conditions to allow the yen appreciation of the strong material basis. And Japanese industrial competitiveness and export increase mainly by the development of domestic enterprises, Japanese enterprises, many of the core technology is developed by themselves, which also makes the Japanese enterprises later to be able to withstand the pressure brought about by the appreciation of the yen. Despite the implementation of the floating exchange rate, 1971 to 1985, the yen appreciation process is still relatively gentle, from 1:315 to 1:200 level, this stage of the yen appreciation did not hinder the good momentum of Japan's economic development.
From the early 1970s, the international economic situation began to change greatly. In particular, the impact of the oil crisis caused the core countries for stagflation. Japan also suffered from the "triple trouble" of "inflation", "depression", and "balance-of-payments deficits" in the two years of 1974 and 1975. In 1975, Japan also suffered from the "triple difficulties" of "inflation", "depression" and "balance-of-payments deficit". In the face of these three economic difficulties, Japan adopted a severe financial austerity policy, and finally overcame the domestic inflation caused by imported inflation, and brought down the domestic inflation rate.
At the same time, Japan further accelerated the process of high processing degree and high openness of its industrial structure. Its international competitiveness was gradually restored, exports began to increase, and completed the recovery of the boom and the current balance of payments of the black-letter conversion, the economic growth rate began to stabilize at 4% -5%, and became the first to get rid of the "triple difficulties" of the country.
One of the most prominent growth is Japan's automobile industry. As the Japanese automobile industry relies on rationalization means to solve the oil crisis caused by the price of raw materials and rising wages, the Japanese car's low production costs and high quality so that its exports increased rapidly, the market share rose rapidly. 1975, Japan jumped to become the world's largest country in automobile exports. Under the great attack of Japanese cars, the operation of European and American automobile enterprises began to deteriorate and unemployment surged. So they set up barriers that discriminated against Japan such as import restrictions and export self-restrictions. Nevertheless, in 1981, Japan's automobile exports still amounted to 6.05 million units, while the Federal Republic of Germany, which ranked second in the same year, only had 2.15 million units, and the United States, which was known as a big automobile country, exported only 690,000 units that year. The automobile industry dominated the world market and became the main factor to promote the refinement of the chemical industry, but also to the development of Japan's iron and steel industry and electronics industry has brought great influence.
In the first half of the 80's, the imbalance between national and regional trade balance and current balance of payments expanded significantly. 1985, as the center of the 20th century system of the United States, the United States, in the emergence of 124.4 billion U.S. dollars of huge trade deficits at the same time, and the emergence of the so-called current balance of payments deficits and fiscal deficit coexisted with the "twin deficit". ". For the first time in 75 years since World War I, the United States was reduced to a purely debtor country, with a balance of $111.9 billion in foreign claims.
On the other hand, Japan to adapt to the oil crisis after the change in conditions of capital accumulation and the implementation of industrial restructuring has been very smooth, to the 80's there is a huge trade surplus, the surplus in 1981 for 8.7 billion U.S. dollars, to the 1985 surplus has increased to 46.1 billion U.S. dollars, five years between the increase of nearly 6 times, which exports to the United States of America, the rate of increase of 74%.
The U.S. trade deficit and Japan's trade surplus increased just formed a sharp contrast, while the U.S. trade deficit in nearly 40% is in the trade with Japan occurred. It is such a serious imbalance in the market pattern triggered the years-long Japan-US trade friction since then. In Detroit, the unemployed, enraged by Japanese imports, vandalized and burned Japanese cars to vent their anger. Such incidents are common in the United States as Japan's economy grows.
In this process, the Japanese government to the United States to take the "mouth favors not to" foreign trade policy, to the development of domestic industry to buy more time. Still take the automobile as an example. 1980 May, Japan and the United States reached an agreement to encourage Japanese automobile enterprises to invest in the United States to set up factories. But this weak agreement on the Japanese companies almost no binding force. 1981, although Japan and the United States almost every year on Japan's "self-imposed restrictions" on the issue of negotiation, but Japan and the United States automobile trade in the serious imbalance has not been fundamentally reversed, the United States of America to Japan's trade deficit is still widening. To the mid-1980s, Japan's economic scale has been two Germany so big, in automobiles, steel, electronics, robotics, semiconductors, liquid crystal displays and other industries with strong competitiveness. The Americans were alarmed by the "threat" of Japan. Under the pressure of this economic crisis, like Nixon, the Reagan administration also hoped to use the exchange rate - with the dollar depreciation to strengthen the foreign competitiveness of U.S. products and reduce the trade deficit.
September 22, 1985, in the United States under the initiation of the OECD seven finance ministers and central bank governors at the Plaza Hotel in the United States signed the Japanese so far still haunted by the "Plaza Agreement" (Plaza Agreement). Its main content is that the rate of the dollar against other major currencies in the world within two years to depreciate 30%, thus forcing the yen to appreciate. Since then, the yen's exchange rate began to rise rapidly and entered a 10-year-long appreciation cycle. This was the third stage of yen appreciation. The yen appreciated sharply during this period, in 1985 to 1996 in 10 years, the yen against the dollar ratio from 250:1 to 87:1, nearly three times. 1995 April, the yen had once reached 1:80 level. Plaza agreement, opened the Japanese companies overseas mergers and acquisitions wind and the rise of the bubble economy, later recognized by many scholars as one of the culprits triggering Japan's economic recession to date.
Toward a bubble
After the Plaza Accord, the yen accelerated appreciation, in the second half of 1986, the yen appreciated to 150-160 yen per dollar. As the exchange rate ratio rose, the international market price of Japanese goods also rose sharply, which weakened the competitiveness of Japanese products, resulting in a slowdown in the growth of its exports, Japan's export-oriented industries have a considerable impact on the Japanese exporters to make every effort to maintain their survival. 1985, the period of October-December, compared with the previous year, the export of negative growth. 1986, the period of April-June, the nominal export growth of the yen, the yen, the yen, the yen, the yen, the yen, the yen, the yen. During April-June 1986, nominal exports decreased by 19.5% and real exports by 7.8%. As a result of the decrease in exports and the increase in imports, the Japanese economy fell into a slump caused by the appreciation of the yen, and the economic growth rate in 1986 dropped to 3.0% from 4.4% in the previous year. This is the so-called "yen appreciation depression".
By 1987, the dollar exchange rate stabilized, Japan finally got rid of the "yen appreciation depression", the economy began to improve, and in December 1986 began to "Heisei boom" for the beginning of the economic upturn, stepped into the boom! Recovery of the right track, the economic rebound began to accelerate, foreign trade grew rapidly. 1984 trade size of more than 300 billion U.S. dollars, to 1988, 1990 and 1993, the size of its expansion to 400 billion U.S. dollars, 500 billion U.S. dollars, 600 billion U.S. dollars or more, and since 1986, Japan's most years of the size of the trade surplus has remained in the more than 50 billion U.S. dollars. . The appreciation of the yen has not caused any real negative impact on Japan's foreign trade, which has become a paradox and is one of the popular topics often discussed in the academic community.
The strong yen has led to a sharp rise in Japan's labor costs, domestic prices soared. In this context, in order to reduce costs and take advantage of cheap labor overseas, a large number of Japan's traditional manufacturing enterprises to overseas transfer of labor-intensive production, and this trend is becoming more and more intense. Not only have large Japanese companies invested in factories overseas, but small and medium-sized enterprises that provide parts and components for these large companies have also been forced to move overseas for their own survival. Japan's large-scale overseas investment has correspondingly reduced the scale of domestic production, leading to the deepening of the phenomenon of hollowing out of domestic industries. Accelerated foreign investment, but also lead to Japan's domestic demand is insufficient. For a long time, the Japanese enterprise mass layoffs, a large number of small and medium-sized enterprise bankruptcy, which to a certain extent caused by the domestic unemployment rate rising year by year. Last year, Japan's unemployment rate has hit a record high level of 5.4%, two or three times higher than the period of rapid economic growth.
An expert believes that, as Japan's emerging industries have not yet become a climate, can not take over the traditional industries to pick up the beam of the Japanese economy, so Japan's traditional enterprises to invest in large-scale overseas only to Japan's domestic demand and employment has a great impact. And the lack of domestic demand in turn affects the investment needs of enterprises in the country, and ultimately the formation of a vicious circle, which led to the Japanese economy into a decade-long downturn and can not be pulled out of one of the important reasons.
"If a country's currency is strong, there will be a natural tendency to expand outward. If it happens that interest rates fall again, that's fuel for the fire."
In 1986, Japan's economy began to show a downward trend. In order to achieve economic growth, Japan's Ministry of Finance and the Bank of Japan tried to maintain the domestic economic boom through loose monetary policies such as drastic interest rate cuts. This year, Japan four times to reduce interest rates, the cumulative reduction of nearly 2%, from 4.5% in January 1986 to 3.0% at the end of 1986, so that the interest rate differential between Japan and the United States by the Plaza Accord when the 5% narrowed to 2%. 1987 February, Japan once again will be the interest rate down to 2.5% of the unheard of ultra-low interest rates.
The sharp drop in bank interest rates allowed the domestic surplus to be invested in the stock market and real estate and other non-productive instruments. Real estate companies took advantage of the low-interest loans to speculate and buy up limited urban real estate, resulting in a crazy rise in real estate prices in Japan, which worsened the environment for the development of the manufacturing industry. The speculative rise in urban land prices became the basis for speculative bubbles. Land became the collateral for banks to lend huge sums of money, which in turn were used to buy land or stocks on the Tokyo Stock Exchange, while these newly acquired land or stocks were used as collateral to obtain more money from banks.
At the same time, because interest rates were so low, Japanese banks also lent to risky and speculative borrowers such as the real estate market and real estate finance companies, and bank lending to the production sector declined sharply, reversing the weight of lending. By 1990, the share of loans to production had declined to 25%, while the share of loans to non-production had risen to 37%. During this period, the nominal growth rate of Japan's GDP (in yen terms) was only 5.7 percent per year, while the average annual growth rates of the prices of stocks (1986-1989), residential land (1987-1990), and commercial land (1987-1990) were high at 31.3 percent and 14.41 percent, respectively. 31.3 percent, 14.41 percent, and 15.6 percent, respectively. "The expansion of Japanese capital in non-production areas triggered the inflation of the value of virtual assets, which in turn became overvalued, creating a bubble economy." Enterprises, banks and securities companies were surrounded by "bubbles", and this state of affairs seriously affected the normal cycle of the real economy, and laid the groundwork for the 1990 stock market crash, corporate failures, and the collapse of the bubble economy.
Ronald I. McKinnon, professor of economics at Stanford University, believes that lower nominal interest rates to Japan's monetary policy set a liquidity trap, so that the interest rate tool has lost the role of regulating the economy, through the monetary policy, an important regulatory tool has been difficult to achieve the desired goals. Under such circumstances, there was only one way out left to restore the economy, and that was to allow asset prices, especially real estate prices, to continue to rise. The bubble economy turned out to be a lifesaver. The appreciation of the yen eventually induced the bubble economy and left a legacy of macroeconomic management for Japan.
In the 10 years since the Plaza Accord, the yen exchange rate has risen by an average of 5.2% per year. This means that if international capital buys a certain asset in Japan (e.g., stocks, real estate, bonds, Japanese yen), even if this asset is not profitable, it can gain an appreciation of 5.2% per year through changes in the exchange rate. In the early days of yen appreciation, only a small amount of international capital entered Japan and bought Japanese stocks. Since then the yen has appreciated and stocks have risen, attracting more international capital into Japan. This further stimulated the appreciation of the yen, which led to an excessive increase in Japan's domestic money supply. Coupled with the very loose low-interest-rate monetary policy in Japan at that time, the ****same effect of these factors stimulated the continued bullishness of Japanese land prices, stock prices, and prices of high-class paintings and other works of art. The continued rise in prices fueled speculative behavior and finally culminated in a spike between 1988 and 1989 that could not be explained by its own terms.
"Cars with bands blew and marched, curious people followed to find out what was going on, and when they saw the cars and people following, more people joined in out of curiosity, and finally the number of people who followed the cars for no apparent reason grew larger and larger." The Japanese speculation phenomenon of this period, Japanese financial experts Suzuki Shukuo made this image to explain.
In July 1987, Van Gogh's famous painting "Sunflowers" was shipped to Japan. The Nihon Keizai Shimbun reported this on October 23 of the same year: "...... This is the peak year for the import of high-value paintings. The total amount of paintings imported until August has hit a record high, and the average unit price of paintings imported from Europe and the United States has reached 5,380,000 yen, about three times that of last year......."
At the same time, Japan's stock market and real estate both hit staggering post-war record highs. At the end of 1989, the average Nikkei stock price rose to an all-time high of 38,915.87 yen. At that time, Japan popularized such a statement, "wage earner investors sleep on the pillow of the stock for the New Year, the office lady holding the stock overseas travel".
1986-1989, Tokyo city center land prices increased by 2.7 times. If all the land in Tokyo's 23 districts were sold, it could buy the entire U.S. During the three years 1988-1990, land prices in Osaka and Nagoya soared 2.2 and 1.6 times the public price of residential plots, respectively. Many believe that the Japanese real estate bubble began with the skyrocketing land prices in Omotesando, Harajuku, Tokyo. Omotesando used to be a small, dark and quiet street, but as Japan's economy grew, it gradually developed into a bustling shopping street. Before that, the price of land in Harajuku Omotesando was 2 or 3 million yen per tsubo (equivalent to 3.3 square meters), but by the end of the 1980s, the price of a tsubo had risen to tens of millions of yen.
In addition, the sharp appreciation of the yen also made the value of yen assets in the hands of the Japanese soared, contributing to the phenomenon of false prosperity throughout society. 1990, Japan's per capita GNP and assets exceeded the United States, becoming the world's largest net asset income, the number one creditor and financial power, "the Japanese began to rise up to the world and buy the world's ten-thousand-fold." They turned their huge overseas investment to U.S. Treasury bonds and real estate, began to buy a large number of U.S. companies, buy the Empire State Building, buy real estate in Hawaii, so much so that the Americans exclaimed that the Japanese are "buying the United States"!
In September 1989, Sony bought Columbia Pictures, later renamed Sony Pictures Entertainment, for $3.4 billion. Matsushita Electric Industrial Company, on the other hand, bought American Music Company. Mitsubishi Corporation purchased the Rockefeller Consortium's Rockefeller Center building. In order to avoid a public outcry in the U.S., the Mitsubishi Group and the Rockefeller Group signed a "secret agreement to purchase 80% of the shares." In Hawaii, during the peak tourist season, about half of the regulars in the hotels are Japanese. There was also a billionaire from Japan who invested $150 million in 178 houses in the United States in a single year. However, this period was actually the peak of the U.S. real estate bubble, when real estate prices were over-inflated and U.S. speculators were selling off. Japan just smoothly took over the US economic bubble.
Although GNP per capita and assets exceeded those of the United States, this does not mean that the living standards of Japanese nationals also exceeded those of the United States. In fact, the standard of living of Japanese citizens has worsened. In stark contrast to the Japanese "purchase of America", the purchase of a home in their home country has become an unattainable dream for the average Japanese citizen due to inflated assets and high land prices. Import barriers and competitive obstacles in distribution organizations have widened the price gap between domestic and overseas. The backwardness of the social capital associated with life has intensified the chaos of commuting to and from work on trams and highways. In addition, this phenomenon of excessively long labor hours remains unchanged, and death from overwork has become a major social problem in modern Japan.
In a poll conducted by the Prime Minister's Office in September 1988 on economic restructuring, only 22.4% of the respondents answered the question "Do you really experience a rich life comparable to the highest income level in the world? Only 22.4% of the respondents answered "yes" to the question, while 69.2% answered negatively. In the White Paper on People's Lives (1990) provided by the Economic Planning Agency, the percentage of young and middle-aged people who were satisfied with their lives in general was very low, at only 30-50%. Of all the interviewees, men living in Tokyo and in their 30s were the least satisfied with life.
The "bubble economy" peaked in late 1989. The Japanese government, recognizing that land prices were way out of line with real values, began to tighten monetary policy to discourage banks from lending to speculators, and on November 25, 1989, the Bank of Japan raised the discount rate to 4.25%, and then again to 6% in August 1990, marking the end of the era of financial détente. Suddenly, like a bolt from the blue, the Nikkei's average stock price plummeted from 38,000 yen from December 1989 to January 1990 to 29,000 yen from February to April 1990, and Japan plunged into the "triple weakness" in which the three types of markets, namely, bonds, stocks, and the Japanese yen, plummeted at the same time. At this time, the "bubble" of land prices also began to burst. Land prices in major cities such as Tokyo and Osaka began to fall, and have been falling since 1991. From 1991 to 1992, the decline in residential land prices was 22% in Tokyo, 36% in Osaka, and 13% in Nagoya. The actual decline in general land prices may have been even worse than that.
After the bubble economy collapsed, many people in Japan committed suicide because they could not repay their debts. The situation is particularly dire for Japan's 50-something wage earners. Most of these people borrowed money to buy a house, but after the collapse of the bubble economy, the price of the house fell by half, even if the house is sold can only repay half of the loan. In addition, the price of the company's stock held by these people has also dropped by 2/3. Due to zero economic growth, not only do they not get a raise in wages, but they also have to face the pressure of "unemployment".
The soft landing of the real estate market and the stock market created a crisis of non-performing loans and the threat of insolvency of the entire banking system, and the failure of financial institutions and real estate companies occurred from time to time, and Japan's economy then entered into a 10-year recession, from which it has not yet recovered. Japanese people call this 10 years for the "lost 10 years".
The yen appreciation syndrome
"Plaza Accord" after the appreciation of the yen on the Japanese economy has had an immeasurable negative impact. The biggest negative impact of the appreciation of the yen is reflected in Japan's foreign trade. For this country to rely on the "export-oriented economy", exporters suffered the brunt of the blow.
According to the Asahi Shimbun reported that Japanese companies to 120:1 yen to the dollar exchange rate as a prerequisite for production and business, the exchange rate of every 1 yen, Hitachi's sales will be reduced by 23 billion yen, a reduction of operating profit of 3 billion yen, Sony's sales and operating profit were reduced by 33 billion yen and 8 billion yen, Toyota Motor Corporation's operating profit will be reduced by 25 billion yen. 25 billion yen.
The oscillating upward movement of the yen reduces the microeconomic efficiency of international trade and leads to serious macroeconomic instability in Japan. Under the conditions of economic globalization, the appreciation of the yen has seriously worsened the investment environment in Japan itself, so that the investment costs of domestic and foreign investors have risen sharply, and there has been a massive outflow of investment and a sharp decline in domestic investment. This further led to Japan's domestic deflation and price decline, such as February 1985 to February 1988, the nominal effective exchange rate of the yen appreciated by 40%, while the same period of Japan's export price index fell by 31%, wholesale prices fell by 17%, consumer prices rose by only 2%.
In the field of yen research is very authoritative economist McKinnon will be the yen appreciation after a series of anomalies defined as "yen appreciation syndrome". He believes that since 1971, the United States and Japan in the implementation of commercial policy, exchange rate policy and monetary policy in the process of mutual influence, the formation of the "yen appreciation syndrome". Japan and the United States trade friction, the U.S. government pressure on the appreciation of the yen, and ultimately distort the distribution of resources, resulting in the two countries have suffered economic and welfare losses. The Yen Appreciation Syndrome was a decisive factor in the two recessions of 1986-1987 and 1993-1995, and although the soaring stock and land prices in 1986 prevented Japan from falling into a serious recession in the short term, the bubble burst in 1990-1991 followed, causing it to fall into a serious recession in the short term. The bursting of the bubble economy in 1990-1991 plunged the economy into a more severe recession in 1993-1995.
The decline in land prices and stock prices caused financial institutions that had lent money during the bubble economy (almost all of them) to suffer from bad debts, and the rate of bad debts and bad loans exceeded 10% of all loans, which put the Bank of Japan in a situation of financial instability. In addition, the wild land investment and the failure of fiscal policy during the bubble period led to the creation of huge amounts of non-performing loans in Japan. One of the most typical cases was the handling of non-performing loans caused by the bankruptcy of the Japan Housing Finance Specialized Corporation (Sumitomo). After 1996, when the effects of the collapse of the bubble economy were fading, banks throughout Japan*** handled about 57 trillion yen of non-performing loans.
Some experts believe that, in the case of the appreciation of the yen, Japan's appropriate economic policy should be to take reform measures to expand domestic demand, shifting its economic focus to rely on domestic demand rather than exports. in the late 1980s, Japan also has a lot of opportunities for expanding domestic demand, such as housing, health care, urban planning, urban transportation is very potential for development, but Japan did not take this route, but rather tied itself more tightly to the United States. In order to minimize the impact of exchange rate appreciation, the monetary policy response of the Japanese authorities has been to try to eliminate the macroeconomic impact of the exchange rate, with the Bank of Japan sharply lowering interest rates to stimulate investment. The chief economist of the Deutsche Bank in Tokyo estimated that in 1986-1991, Japan*** invested about $3.6 trillion in new businesses, equipment and research with the aim of reducing production costs by 40-50%. As a result, a huge overcapacity was created because international and domestic consumer demand was not taken into account. This led to a banking crisis and economic stagflation that Japan has yet to overcome.
The biggest lesson of Japan's macroeconomic management is the inappropriate response to external shocks. In the strong external trade pressure, Japan was forced to make the choice of international coordination policy priority, so that the yen has long been facing huge appreciation pressure or appreciation expectations, and the macroeconomic control authorities of its cumulative negative impact of the underestimation, and even for the yen appreciation brought about by false prosperity and other short-term interests of the confusion, can not take effective countermeasures. The end result has been the deepening of the yen appreciation syndrome, which has had a huge and devastating impact.
However, each appreciation of the yen has brought some benefits to the Japanese economy to varying degrees. As Japan's imports and exports are denominated in U.S. dollars, the depreciation of the U.S. dollar, the yen's appreciation of Japan's imports of raw materials and oil and other aspects of the savings of a large amount of foreign exchange. Export losses and import benefits offset, the result can also make Japan get a huge "yen appreciation differential benefits". 1985 yen appreciation differential benefits reached 3.5 trillion yen.
The appreciation of the yen also makes Japan's GDP in U.S. dollars correspondingly increased, the economic strength is rapidly approaching the U.S. In 2002, Japan's GDP was 5,381,206,000,000,000 yen, about 40% of the United States. Japan's balance-of-payments surplus has also increased dramatically; in 1998, the balance of Japan's net foreign assets exceeded $1 trillion, making Japan the richest country in the world. At the same time, Japan's foreign exchange reserves have increased dramatically, to today has more than 300 billion U.S. dollars, becoming the world's largest foreign exchange reserves.
Adequate foreign exchange and greatly promote the export of capital and the internationalization of the yen, and to the yen to bring value-added benefits of foreign borrowing, reducing the burden of repayment of loans. 1986, Japan set off the "Buy American" fever, Japan's economic structure has undergone a major change from the stage of commodity exports began to shift to the stage of capital exports. The first step is to make the first step in the process of the development of the country's economy.
The relative change of domestic and foreign commodity prices, the deterioration of the export environment in the Japanese export enterprises by the impact at the same time, but also prompted it to improve their competitiveness and labor productivity. In the face of the adverse effects of the appreciation of the yen, Japanese enterprises have implemented rationalization of business measures. Such as retreat from the loss-making field, the implementation of multilateral management, increase investment in research and development, improve the product structure, improve the added value of the product and so on. Japanese enterprises in overcoming the negative impact of the appreciation of the yen has achieved great success, export trade volume rose year after year.
The Japanese government is to see these benefits, only in the Plaza Conference finally made the choice of international coordination policy priority, in an attempt to ease the Japan-US trade friction, to avoid the deterioration of relations between the two countries, and take the opportunity to improve the yen's international status, and thus improve Japan's status in the world. Unfortunately, due to the failure of Japan's macroeconomic policy, and ultimately triggered the yen appreciation syndrome, the Japanese economy has caused a fatal blow.