Question

Discuss developments of business fixed investments after the GFC. 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 caused great degrowth with huge credit crunch and leveraged balance sheets for businesses. Salaries have been delayed and mass layoffs have been observed across various areas of world. The dixed investment regime has drastically resuced and also slumped FII activities across emerging markets. Due to excessively low availability of credit and decreased consumption, the revenues and profitability have taken hit which further delays dividends and investment into capital expenditure.

These have affected Japanese economy alot as Japan has already seen slumped consumption and also seen negative interest rate regime. Due to recession and financial crisis the disposable incomes have beenmuch lower, investments too have been reduced and resulting into wide scale degrowth as well as deflationary prices across goods. Japanese Yen has depreciated to large extent and budget deficit to boost economy has increased considerably .

The desired growth path us use of automatic stabilizer like Unemployment insurance to job losses and relief packages by Government through international borrowing . An expansionary monetary policy will further reduce rates and hence highly ineffective . So its best to cut down taxes as well as cash reserve ratios so that sufficient credit supply rotates in Japanese economy and consumption is revised to achieve stability in real GDP and Employment opportunities.