Japan Oil Crisis Case Study

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After the time of the economic boom in the late 1960s followed the oil shock 1973. During this time increased the wholesale and customer prices for oil by 23-28 percent. The crisis had significant effects on the Japanese economy and brought them major difficulties. In whereas the national Bank of Japan had to tighten the money supply and raise their rediscount rate up to 9 percent. Because of the cuttings in money flow and the oil supply the deceleration of the economy led to the decrease of the GDP by 17% into the negative. Yamazawa, 1990 (p.200) To work against the crisis from 1973-1974, followed the time of recovery in which Japan had several attempts and arrangements to repair the damages of the oil crisis. Yamazawa explains that Japans terms of trade were lowered by 42% during 1973-1975 because of their current account deficit, together with increasing oil price. During 1975-1976 the National Bank managed to keep the exchange rate between 284.90 and 360.00 Yen to the dollar. That in 1976 Japan recovered and had a growth of 5 percent and the account showed a surplus.…show more content…
1990 (p. 200) Shortly after the first crisis followed the second oil shock in the year 1979. Which was as well attributed to the increase of the world’s oil price. Compared to the first crisis 6 years earlier had this crisis no bigger effects on the Japanese economy. To response to the disinflation of the second oil shock did the United States led to high interest rates. The effect was that the Yen had the strongest exchange rate towards the dollar with 263,65 – 1 in February

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