Signature Assignment: Strategic Plan: Implementation Plan, Strategic Controls, and Contingency Plan Analysis

Explain how Japan's financial system is related to key macroeconomic variables

The financial system of Japan consists of the commercial banking institutions and the specialized financial institutions that are owned by the government. The commercial banks undertakes activities such as accepting deposits, extending loans to businesses and individuals and takes part in foreign exchange. On the other hand, the government owned financial institutions deals with activities such as funding different sectors in the domestic economy, underwriting both corporate and government issued securities and also takes part in the securities markets. The financial system of Japan has a great relationship with a number of macroeconomic variables in the country.

One of the ways in which the financial system is related to the key macroeconomic variables is through the interest rates (Dewatripont, Freixas, & Portes, 2011). In this, when the financial system of a country such as banks increases their interest rates on loans, the loans becomes very expensive to pay back. This makes it very difficult for people to take loans due to the fear of affordability during the repayment period. In addition to this, when the interest rates increases in the financial system, the people are discouraged to take loans and this affects the level of a country’s economic growth. The other way in which the financial system of Japan is related to the key macroeconomic variables is through unemployment. When the financial systems increases their interest rate on loans or put strict measures in accessing of the loans, the people’s capability of accessing loans is limited. This results to the creation of unemployment since some businesses are forced to close down while other people who are willing to start businesses cannot access loan and they thus remain unemployed.

References

Dewatripont, M., Freixas, X. & Portes, R. (2011). Macroeconomic stability and financial regulation : key issues for the G20. London: Centre for Economic Policy Research in association with the London Publishing Partnership.