Japan And Korea Economic Impact On Global Economy

INTRODUCTION Japan and Korea are two of the strongest economies of Northeast Asia and have been very important players in global economy since the start of globalization era. These two economies have major impact on global economy. Both the economies have experienced various external and internal challenges. Therefore, it is important that we look at how these economies have been performing historically, more specifically since 1980s, so that we could get an idea about who might be a more significant player in the global economy in the future. History shows that both the economies have experienced high growth rates and crises and both the economies dealt with implementing various policies. Both the countries responded to the crises in†¦show more content†¦Japan government was under a huge pressure to recover the economy under a lot of pressure to improve the economy and was unwilling to force banks to restructure their loans portfolio policy otherwise can result in the failure of major keiretsus. Many critics consider that Japan’s macroeconomic policies should have been more aggressive and steady. These policies should have been more flexible in order to recover from great recession. Conventional measure shows that the fiscal and monetary policies of japan were expansionary. These policies lowered the interest rates very rapidly. Caballero, Hoshi and Kashyap (2003) stressed on the zombie firm to explain why lower interest rates and big budgets deficits have not emphasized the zombie firm explanation and explained why the low interest rates and big budget deficits have not transformed the economy. The low interest rates had helped to keep the banks alive and boosted the aggregate demand to some extent due to deficit spending. But none of these policies concentrated on closing the insolvent banks and getting rid of their zombie borrowers who were affecting the economy. The government policies also upset the rehabilitation and restructuring. For example, the government permitted the poorest banks to carry on to attract financing and supported the insolvent borrowers by constantly delaying the advance of the deposit insurance to limit its exposure (Hoshi and Kashyap 2004). The regulators also choose not to strictly enforce