Japan’s Role in the Global Crisis

Drawing from reports and projections, the global financial crisis is far from over and is likely to continue until the end of 2009. Now, before we ask when it will stop, let us first examine where and how this doom began. Why does it significantly affect the world’s top economic powers like the U.S., Japan and other European countries? What is the role of Japan in the problem, and how will its efforts contribute to the resolution of the crisis?

To give you some background, the global crisis actually started with failures in the control of bad debts (particularly in the housing market) and collateralization of debt insurance in the U.S. and European financial industries. The credit crisis resulted to a slowdown in the economic activities in the two regions, which then rapidly spread around the world like a pandemic. From then on, other counties, like Japan, caught the flu.

Credit Crisis

A number of initiatives have actually been implemented to curb the aggravation of the case; however, some efforts failed to get their desired results. In Japan, government officials have talked about economic stimulus plans, and have recently implemented tax breaks and interest rate adjustments. But are these really the right solution? Ozaki Masahiko, a senior fellow at Research Institute of Economy, Trade & Industry or RIETI, shared his views about the issue in one of his essays. He suggested that in order for Japan to ride out the economic challenge, it must draw up long-term plans, set long-term targets and enhance social norms or the normative consciousness among citizens. The latter proposition means that people must be educated to consider the impact of their financial and buying decisions on the country’s overall economic health. Other experts also have different opinions on how the ongoing fiasco must be solved. Some suggest the creation of a global currency to limit the damages of such crisis, while some push for the release of an economic stimulus. In the meantime, Japan is participating in an effort led by the world’s top economic players to put an end to this catastrophe.