Insight into Japanese Bubble Economy. by Zhang Wei(Vivi) Xie Huawei(Amy) Hu Yingjian(Mike). Content : Define economy bubble Use the graph analyze what is bubble World’s first speculative bubble Japanese economy from 1970s to 1990s How did bubble form
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a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed
Throughout the 1970s, Japan had the world's second largest gross national product
From the end of 1980s to beginning of 1990s, Japanese economy increased dramatically, whichimplied the bubble economy of Japan
In early 1990s, the bubble was collapsed
Sony Corp. used $ 3.4 billion to buy the soul of America Hollywood Columbia Pictures
Japan invested$ 6.5 billion in Hawaii
U.S. dollar exchange rate was too high
large trade deficits in U.S.
Japanese currency appreciation
Japanese low interest rate policy
“Speculators create the bubble which lies above everything. They increase prices with their expectations, with their bets on the future, and their activities distort prices, especially in the commodities sector. And that is just like secretly hoarding food during a hunger crisis in order to make profits from increasing prices.”
—— George Soros
‘Speculation’ and ‘speculator’ are used rather in a negative sense and speculation is not recognized as one of the most decisive incitements behind economic behavior.
The difference between Speculation and investment is the fundamentals. And speculation at least contributed to bubble.
In 17th century, speculators bought the harvests of Japanese rice famers.
oil prices go up, the price of rubber also goes up and as a result the demand for natural rubber goes up.
In 2011, Japanese earthquake strength yen appreciation.
Japanese manufactures move more operations overseas.
Toyota, Honda and other Japanese companies try to move as much production overseas possible to cut costs.
IMF lowered its growth estimate of Japan from 1.8% to 1.5%.
1996~2006, about 220,000 manufacturing sites vanished, causing a loss of about 3 million jobs in Japan.
That is Bubble!!!
at 99.4% of all the enterprises.
at 99,7% of all the enterprises.
Why in real estate industry people would like to buy it when the price increased?
Analysis from the demand function:
D= f ( P, T, I, Pe, pr……)
Original: price increase, demand decrease
But: expected price >> price
USA Salomon Brothers，Morgan Stanley-------Stock index put option ----BET------high reputation（Goldman Sachsmade the option, Goldman Sachs sold to Denmark, the Danish Government endorse）
January 2, 1990,the option listed on the USA stock exchange, which made the global capital suppress the Japan’s economy.
Neo – Classical Model Y= f (K,L,T)
Endogenous Growth Model Y = A KaHb L1-a-b
-----Marx's 《Das Capital》
Primary Productive Force
----- Premier Wen