Oecd estimates put the direct restrictive impact of

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Unformatted text preview: rowth in 1996, the authorities misguidedly sharply tightened fiscal policy. OECD estimates put the direct restrictive impact of this change at some 2 per cent of GDP (OECD, 1998). Finally, in 1997–8, Japan was hit by the Asian crisis. The eight smaller East- and SouthEast-Asian economies that were directly or indirectly most affected, accounted for 35 per cent of Japanese exports in 1997. Sales to this area fell by as much as 27 per cent in 1998.4 In addition, these countries were also responsible for some 25 per cent of the international lending of Japanese banks. The losses incurred on some of these foreign loans are likely to have reinforced banking contraction at home. 4 Thus, OECD estimates suggest that, in 1998, the Asian crisis may have reduced Japanese GDP growth by 1½ to 3 per cent (Richardson et al., 2000). 3 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 16, NO. 2 This list of basically exogenous shocks can go a long way in explaining the country’s experience over the decade. The collapse of the late 19...
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