Question

Last January 2016 the central bank of Japan (Bank of Japan/BoJ) announced that it applies a...

Last January 2016 the central bank of Japan (Bank of Japan/BoJ) announced that it applies a negative rate, -0.1%. But negative interest rates are a good sign for markets, as they could address some challenges peculiar to Japan’s economy in recent years — especially the consumption tax that walloped spenders two years ago.

What should the company do in responding to those situations in order to positively maintaining its international business particularly in Japan?

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Many developed countries continue to suffer from falling prices and a stagnant economy. Take, for example, Japan. In the 17 years between 1999 and 2015, consumer prices in Japan increased by 2.4 per cent, 1.6 per cent and 0.7 per cent in one year each, by 0.2-0.4 per cent in four, and declined in the other ten years.

After growing annually at an average of 10 per cent in the 1960s, five per cent in the 1970s, and four per cent in the 1980s, Japan has been growing at anaemic rates since 1991. After 1991, the economy has contracted in six years, grown by zero-one per cent in five, one-two in seven, two-three in four, and by 4.7 per cent only in one. Furthermore, the yen has gained in value from 360 per US dollar during 1949-1971 to around 100. Stopping it from appreciating further is proving to be a challenge. Export-oriented Japan suffers when the currency appreciates. Stimulating domestic demand and promoting growth are proving to be formidable challenges.

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