The Impact Of The Yen Supply On The Japan Economy And Implications For China

The economic bubble burst in1991, Japan has experienced a20-year economic downturn, and facing long-term deflationary pressures. To stimulate economic growth and get rid of deflation, Japan, the world’s first implementation of "zero interest rate" and monetary policy of quantitative easing type, Japanese Loose monetary policy does not achieve the desired goals the contrary, it is up to two years of economic downturn and deflation.In this paper, a comparative analysis of the economic situation before and after Japan’s bubble economy and monetary policy, The reasons for Japan’s monetary policy since the economic bubble burst and cause changes in the effects of monetary policy in Japan as well as China’s monetary policy.Firstly, through qualitative analysis that the economic bubble burst, Japan’s monetary policy is ineffective, By contrast, Japan’s money supply M2+CD and base money supply growth, Think the main reason for the failure of Japan’s monetary policy is the decline of the Japanese money multiplier and money velocity of circulation, leading to the decline in the Japanese money supply growth rate is relatively bubble economy burst, resulting in a relative shortage of money supply, which can’t effectively promote economic growth and eradication deflation. In addition, the decline in Japan’s savings rate in recent years, caused by the zero interest rate liquidity trap, growing a huge budget deficit, increase in net inflows of foreign investment in Japan, the internationalization of the yen and commercial bank credit creation function to reduce the impact of the yen supply, resulting in Japan’s monetary policy can play an effective role. The same time, the use of mathematical methods to prove that the reasons for the decline of the Japanese money multiplier is due to the rise of the currency-deposit ratio.In the empirical analysis section, using the Granger causality test the Eviews6.01991——2011yen supply M2+CD and nominal GDP, The results show that Granger causality does not exist between M2+CD to nominal GDP, and further support the conclusions of the qualitative analysis.This article yen supply reduced the growth rate of Japan in recent years, the recession and one of the main reason for deflation, In addition, the change is also the yen’s appreciation of the yen supply and causing one of the reasons for the rise in unemployment in Japan, and led to Japan’s fiscal deficit further exacerbated.Although China’s economy is still in a stage of rapid growth, but face the international financial crisis, and domestic inflationary pressures, How to effectively implement monetary policy in order to ensure domestic economic stability and growth and to prevent high inflation is the main problem facing China’s monetary policy. Learn from the reasons for the failure of Japan’s monetary policy, effective control and accurately predict changes in the money multiplier and the velocity of money in monetary policy in order to ensure the effective implementation of monetary policy to cope with the scale of commercial bank credit.