Causes of Japan’s long-term economic recession and policy recommendations

This talk will analyze the causes of Japan’s long-term economic recession which started following the real estate and stock market bubble burst of the 1990s and continued to recently, and provides remedies for this recession that could be useful for other Asian economies. Japan has suffered from sluggish economic growth and recession since the 1990s, a period dubbed Japan’s “Lost Decade”, although it is more than a decade. The People’s Republic of China, the Republic of Korea, Thailand, and many other Asian countries may face similar problems in the future and are concerned by Japan’s long-term recession.

The speaker will challenge the beliefs of some economists, such as Paul Krugman, that the Japanese economy is in a liquidity trap. The book argues that Japan’s economic stagnation stems from a vertical investment–saving (IS) curve rather than a liquidity trap and that monetary policy is ineffective for escalating its economic growth. The impact of fiscal policy has declined drastically, and the Japanese economy faces structural problems rather than a temporary downturn. These structural problems have many causes: an aging demographic (a frequently overlooked problem), local governments’ overreliance on transfers from the central government, high costs of energy due to a non- diversified energy basket as a result of the Fukushima nuclear disaster and nuclear plant shutdowns, and Basel capital requirements that have made Japanese banks reluctant to lend money to start-up businesses and small and medium-sized enterprises. This latter issue has discouraged Japanese innovation and technological progress. This seminar addresses these issues in order to provides several remedies for Japan’s long-lasting recession, which can also provide useful lessons for other Asian economies.

Speaker:

Dr. Farhad Taghizadeh-Hesary is assistant professor of economics at the School of Political Science and Economics, Waseda University, Tokyo, Japan, and visiting professor at Keio University in Tokyo. He completed his master’s degree in energy economics from Tehran University, Iran, in 2011 and subsequently obtained a Ph.D. in energy economics from Keio University in 2015. He was also a visiting scholar and visiting professor at several institutions and universities such as the Institute of Energy Economics of Japan (IEEJ) (2013–2015); the Credit Risk Database (CRD) association of Japan (2014–2015), and the Graduate School of Economics of The University of Tokyo (2016–2017).

This lecture is jointly organised by the Asia Institute Tasmania and the Tasmanian School of Business and Economics.

Please register via Eventbrite if you would like to attend.