3 reasons why it's different for Japan this time

thenews 2013.04.13 20:30

apan has struggled to keep its standing as the world's third-largest economy. For the past 15 years, it has been plagued by falling prices, making it the only major economy to undergo prolonged deflation since the Great Depression. Over the years, the government has tried to reboot the economy to what it once was, only to disappoint investors and the public repeatedly.

This time, it's different under "Abenomics," the term coined to describe policy prescriptions launched by Japan's new prime minister Shinzo Abe. Last week, the central bank announced an aggressive plan to buy $75 billion of bonds a month. The hope is that this would send interest rates lower, giving people and businesses an incentive to borrow and spend more. It's also hoped the move would weaken the yen, which would allow struggling manufacturers to sell their goods and services cheaply to the rest of the world.

There are, of course, some serious risks: Japan's government debt is extremely high. If the program doesn't work, Japan would fall deeper in the money hole. There's also the risk that it could create asset bubbles around the world. And if prices rise too rapidly ahead of Japan's already low wages, it would make everyone worse off.