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Tradition And Innovation Battle In Japan’s Economy

By Michael Auslin (original source Forbes)

“Three news items this week illustrate how Japan continues to balance domestic reform with social stability and demographic change. The macroeconomic picture for the world’s third-largest economy remains bleak, as negative growth returned in two of the last three quarters. The Bank of Japan’s recent move to negative interest rates also has raised doubts about the underlying strength of the economy, without appreciably boosting investment or consumption. Yet the news reveals a more complex picture, in which innovation coexists with traditional patterns of behavior.

Because negative interest rates reduce the profit banks earn from lending, the labor unions at three of Japan’s largest financial institutions announced they will not press for a wage hike during this spring’s annual wage negotiations. Looked at from a cultural angle, the negative interest rate policy has resulted in a reaffirmation of a traditional mode of socioeconomic cooperation in Japan.”

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