Question

Discuss developments of business fixed investments after the GFC (Global Financial Crisis 2008). Specifically, (1) compare with corporate profits, (2) point out reasons behind such developments, and (3) explain possible channels through which such developments affect Japanese economy. Show your own projection or desirable growth path of the corporate sector in Japan.

*This is an essay question, so please write this in detail and at length please.
*I'm looking for other opinions so DO NOT answer this question if you already did.

Answer 1

Since global financial crisis has hit the ecoomy and resulting great degrowth with hummoungous credit freeze and leveraged balance sheets. Salaries have been delayed and mass layoffs have been norm across various areas of world. The fixed investment regime has drastically slumped and also decreased FII activities across emerging markets. Due to excessively low availability of credit and decreased consumption, the revenues and profitability have taken big dip which further delays dividends and stops investment into operational expenditure.

These have affected Japanese economy tremendously as Japan has already seen driest consumption and also observed negative interest rate policies e. Due to recession and financial crisis median disposable incomes have been much lower, investments have been dropped because of negligible demand and resulting into wide scale degrowth coupled with deflationary regime. Japanese Yen has depreciated to great extent and budget deficit to economy has increased at large extent  

Expected growth path comprises of automatic stabilizerslike Unemployment insurance to job losses and relief aid and funds by Government through international borrowing from large banks. An expansionary monetary policy will further bring down rates and hence highly ineffective to boost economy . So it makes sense to cut down corporate and income taxes as well as cash reserve ratios so that sufficient credit supply is made available in Japanese economy and consumption gets revived to bring long term stability in real GDP and push economy to various sorts of growth and Employment opportunities.