The Evolution of Central Banking and Monetary Policy in the Asia-Pacific

The Evolution of Central Banking and Monetary Policy in the Asia-Pacific

Akhand Akhtar Hossain

This book of case studies is a contribution to monetary macroeconomics in which country-specific experience and issues in inflation and monetary policy are reviewed and analysed in an historical context. In doing so, the key ideas and views on the sources and dynamics of inflation and monetary-policy behaviour are investigated after taking into account institutional arrangements for the conduct of fiscal and monetary policies. This book selects for study twelve diverse countries from the Asia-Pacific region including the US, China, Australia, India, Japan, Hong Kong SAR (China), South Korea, the Philippines, Singapore, Sri Lanka, Thailand and New Zealand.

Chapter 6: Japan

Akhand Akhtar Hossain

Subjects: asian studies, asian economics, economics and finance, asian economics, money and banking

Extract

Japan comprises about 7000 islands situated off the east coast of China, Korea and Russia. It is located on a vast volcanic zone that all but encircles the Pacific Ocean, known as the Pacific Ring of Fire. All of Japan is therefore exposed with relatively high frequency to earthquakes, tsunami and volcanic eruptions.1 Japan is relatively land-scarce in so far as productive capacity is concerned. About 73 per cent of its land mass is forested mountains unsuitable for agricultural, industrial or urban settlement. Consequently, most habitable zones are located on coastal plains. Japan’s social, cultural and economic institutions, deep-rooted in ancient cultural traditions, guide its otherwise modern economy. Japanese society is generally viewed as homogeneous, socially conservative and cohesive. This cultural capital contributed powerfully to Japan’s rapid economic growth and dynamism during its ‘industrial takeoff’ phase of development from the 1950s through the 1980s. However, the Japanese economic slowdown from the early 1990s has called into question the strength of social conformities on most matters of economic organization, management and decision-making. Japan became the second largest economy in the world in the 1980s and remained so until surpassed in the mid 2000s by China. Nevertheless, Japan’s post-World War II economic history remains important and fascinating for understanding economic growth dynamics in developing countries.

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