Income Distribution and Economic Growth of Japan Under the Deflationary Economy

Theory and Evidence based on an Econometric Analysis

The Japanese economy has experienced a structural deflationary gap since the mid-1970s. Although the gap was decreasing in the bubble period, the deflationary economy has become more serious since the bursting of the bubble. Accordingly, this book attempts to examine the causes of the Japanese deflationary economy, characterized as a structural deflation and discusses how to alleviate the prolonged slowdown in order to restore Japan to a trajectory of high economic growth, with a special focus on the function of income distribution. In addition, not only income distribution flows but also accumulation of assets and debts in the household sector are taken into account for improving the prolonged economic stagnation of Japan by employing an econometric analysis with modeling and forecasting techniques. Furthermore, this book makes a long-term forecast of the Japanese economy, up to the fiscal year 2030, with policy scenario simulations in order to capture the long-term growth path of the Japanese economy and to analyze the effects of alternative policies on the economy.

Contents:

• Introduction

• The Japanese Economy After the End of High-Growth Era

• The Deflationary Economy of Japan

• Causes of the Deflationary Economy

• The Theoretical Model Framework

• The Demand–Supply Integrated Econometric Model of Japan

• Regression Analysis

• Dynamic Simulation Tests

• Long-Term Economic Forecasts up to FY2030

• Concluding Remarks

• Appendices:

  • Macro-Econometric Model of Japan
  • Variable List and Data Sources
  • Keynes Multiplier with Asset Effect in Theoretical Model
  • Unit Root Test with the Augmented Dickey–Fuller Test for the Other Major Variables: With Trend and Intercept
  • Major Exogenous Variables for the Baseline Forecast, FY2010–2030

Readership: Graduate and undergraduate students, academic researchers, financial analysts and experts interested in the Japanese economy, bureaucrats and policy makers working in the finance ministries, especially in developing countries.
Key Features:

• This book documents an in-depth study into the causes of existing structural deflationary economy in Japan and the resulting phenomenon of Japan's “Lost Two Decades”
• This book argues that distorted income distribution was the root cause of the long-term deflation in Japan
• The book provides possible solutions based on proven quantitative simulation models to jumpstart the ailing Japanese economy and restore it to the pre-recessional-era high-growth levels