1. The Japanese has stagnated due to Japanese banks, which had financed much of the boom in asset prices with easy money, now found their balance sheets loaded with bad debt, and they sharply contracted lending and deflation. The Nikkei average plunged from nearly 39,000 points in December 1989 to about 14,300 points in August 1992, thereby losing about 60% of its value. As a result, investors lost the equivalent of (U.S.) $2 trillion and property values plummeted by about $10 trillion. Property values in certain parts of the country declined by 70% and plunged Japan into a deep recession for 10-years.
2. Other nations can learn a lot from Japan. They can learn from Japan that government regulation is not always the answer to problems. With Japan having a high level of deflation and the working class has become smaller than the class of people that are retired, they may need an immigration reform. America can play close attention to this issue due to the immigration reform we have going on in this country.
3. I think Japan is going to have to change their immigration laws and allow of larger companies to come in and put their people to work. They have to figure out a way to lower the national debt that they are currently operating. Assume that the Japanese government financed its deficit partly by printing money rather than borrowing. Some individuals and businesses that receive this money might simply hold on to it, but others might choose to spend it on goods and services, thereby stimulating the economy. Similarly, higher deposits might simply add to some banks’ excess cash, but others might find it attractive to lend more, providing a bigger economic boost
4. The implications of Japan’s economic stagnation for the benefits, costs, and risks of doing business in this nation are huge. There is no growth in the country due to the people with money being retired and therefore they are not spending. The difference between those who have and those who have not has grown very steadily over the past 10-years. The well-to-do segment of Japan’s social structure continues to prosper, but young people in their 20s and early 30s have become increasingly marginalized and the size of the middle class has shriveled.
5. I would chose to invest in India’s economy rather than Japan. India has just become the 3rd largest economy, passing Japan and demoting them to 4th. Data just released by The IMF shows that India’s GDP in PPP terms stood at $4.46 trillion in 2011, marginally higher than Japan’s $4.44 trillion. In five years, the IMF estimates the share of India’s GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan. India economy is showing sustained growth, which is what you want to see as an investor, while Japan is stagnant.