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Quantitative Easing Expanded in Japan

Posted by Steve Markowitz on April 27, 2012

Japan has been the poster child for economic malaise and the failure of government policies over the past three decades.  While the economic meltdown hit the United States and Europe in 2007, Japan’s meltdown occurred over 23 years ago when in 1989 the Japanese Nikkei stock market hit its peak of nearly 39,000.  Today that index is just over 9,500, less than 25% of its peak value.

Economist have had time to study the Japanese economic problems, its causes and the government’s failures. Japan’s problems started with the popping of the real estate bubble.  It is generally agreed that continuation of the long-term downturn was caused by the government allowing “zombie banks” to continue functioning rather than having them write off their bad debt since that action would have caused many banks to go out of business.  Similar to the United States and Western Europe, the Japanese government deemed these banks too big to fail.

As evidence of Japan’s ongoing economic problems, once again the Bank of Japan “BOJ” today announced it would purchase Japanese government bonds.  This is similar to the Federal Reserve’s actions the United States in recent years called Quantitative Easing.  The BOJ announced it would purchase an additional ¥10 trillion ($124 billion) of the bonds bringing the total purchases to almost $1.25 trillion.

This latest announcement by the Bank of Japan is merely more the same failed policies.  It is evident that the United States and Europe learned little from Japan’s experiences.  Japan has taken the same basic course of massive government borrowing and spending, as well as purchasing its own debt without success, in the failed effort to spur economic growth.  Since 2007 meltdown, the United States and many European countries have taken the same failed approach.  Either the policymakers have turned a blind eye to Japan’s reality or they are merely repeating the failed policies because they have no other suggestions.

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