This preview shows page 1. Sign up to view the full content.
Unformatted text preview: h equally gloomy projections about the future
burden of an ageing population, these forecasts
have almost certainly pushed Japanese households,
as argued by Krugman (1998), into adjusting consumption today to offset an increasingly uncertain
flow of consumption tomorrow. Corporate sentiment has been affected by two forces. On the one
hand, simple accelerator effects, stemming from
low consumer demand, have depressed investment
and employment. On the other hand, companies
massively over-invested (and over-hired) in the
‘bubble’ period. As a result, a large amount of
spare capacity and surplus labour is still weighing
on the economy.
Estimates have been made of the size of this needed
adjustment (OECD, 1999). Excess physical capacity at the end of the decade was probably of the
order of 3–7 per cent of the economy’s capital stock
(or, perhaps, on average, 6 months worth of investment). Excess labour may have been of the order of
2m workers and probably a good deal more, equivalent to at least 3 per cent of total employment. It is...
View Full Document
This note was uploaded on 02/03/2014 for the course ECON 204 taught by Professor Devero during the Summer '13 term at American University of Sharjah.
- Summer '13