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ACKNOWLEDGEMENT
First and foremost, we are grateful to ALLAH ALMIGHTY, most beneficent and the most merciful who made us able to complete our given final project successfully. We would also like to pay tribute to the benefactor of humanity HOLYPROPHET (P.B.U.H) who gave us complete knowledge on every aspect and field of life. In short of words, to express our modest gratitude and recognition on cuddly and loveable PARENTS who at each and every moment prays for our success. We are also deeply thankful to our TEACHER to have taught us from childhood to still especially MAM MEHAR AWAIS who taught us MACRO ECONOMIS.

Thank you all, without you this would have not been possible.

FINANCIAL CRISIS IN JAPAN

LAHORE BUSINESS SCHOOL

ABSTARCT
In this report we describe recent financial crisis to Japan and compare current monetary policy reactions by the bank of Japan with action taken during the 1990s and with current policy reactions by other major central banks. First, we review the recent literature on the origins propagation mechanisms of financial crisis. The, we ask how the financial crisis was hits Japan and describe the policy responses by bank of Japan. We proceed and ask what lessons have been learned by other central banks from the financial crisis of the 1990s.

FINANCIAL CRISIS IN JAPAN

LAHORE BUSINESS SCHOOL

INTRODUCTON
The Global financial crisis occur whole over the world but we choose Japan for this project because Japan has a strong economy and its cover their crisis more quickly rather than other countries. We experienced both the current global financial crisis and Japans last banking crisis in Japan.

JAPAN ECONOMY:
The economy of Japan a free market economy is the third largest in the world. The Japanese currency is the Yen. Japan's main export goods are cars, electronic devices and computers Japan has a surplus in its export/import balance. The most important import goods are raw materials such as oil, foodstuffs and wood. Manufacturing, construction, distribution, real estate, services, and communication are Japan's major industries today. Agriculture makes up only about two percent of the GNP. CURRENT ECONOMIC SITUATION OF JAPAN: GDP: $5.391 trillion Official exchange rate: $4.338 trillion Real growth rate: 3%. Per capita GDP: $34,200. Natural resources: Fish and few mineral resources. Agriculture: Products--rice, vegetables, fruit, milk, meat, fish. Industry: Types--machinery and equipment, steel and non-ferrous metals, textiles, autos, chemicals, electrical and electronic equipment, ships, and processed foods. DATA SOURCES AND COLLECTION: We collect data for financial crisis in Japan through Articles, web sources and magazines journals and research papers. ARTICALES: Japan's New Economic Challenge Author:Sheila A. Smith, Senior Fellow for Japan Studies November 25, 2008 Japan sure victim of global financial crisis www.chinaview.cn By Xinhua Writer Qi Wei

FINANCIAL CRISIS IN JAPAN

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JAPAN ECONOMY HITS BY FINANCIAL CRISIS: Japan recently experienced the second major financial crisis of the last two decades. While the first crisis of the 1990s was entirely homemade and had effect that were largely confined to Japan, the recent crisis originated outside Japan mainly in the US and the UK and was transmitted not only to Japan but to all other major economies worldwide. The bank of Japan and other Japaneses government agencies, such as the financial agency started to react to the financial crisis in September 2008 taking in to the account experiences made during the first financial crisis. Compared with measures taken in other countries. The policy reaction taken in Japan was rather modest quantitively and temporary. This modest reaction may not only be due to the fact that Japan was hitless hard by the current crisis but also because authorities learned from experiences made during the 1990s. In this report we describe the propagation of the current financial crisis to Japan, analyze the policy actions taken by bank of Japan and compare them with policy reactions.

SPECIAL FOCUS FOR THE FOLLOWING THREE REASONS:

First, already during the first financial crisis, bank of Japan to act as a lender of last resort and to provide financial assistance to single financial system. Differences between policy reactions then now help us to understand what kind of financial assistance is appropriate during a financial crisis to regain financial stability. Second all major central banks have significantly reduced policy interest rates and have almost shifted towards a zero interest rate policy and a policy of quantitative or qualitative easing. The monetary policy measures taken by bank of Japan. Finally some other major central banks her monitory policy framework introduced a deposit facility which did not exist in Japan during the first financial crisis.

FINANCIAL CRISIS IN JAPAN

LAHORE BUSINESS SCHOOL

LITRATURE REVIEW
As we explained before that the economy of the Japan a free market economy is the third largest in the world and its main exports goods cars, electronic devices and computers. These exports shows the strong economy of the Japan and now we select those articles for the literature review which directly elaborate the main causes of Global Financial Crisis in Japan. This literature review offers so far only few analyses of the impact of the current world financial crisis on Japan and of the policy action by bank of Japan who provides a short overview over policy reactions by bank of Japan. In this report we compare the policy reaction in Japan during the current crisis with policy reactions taken in Japan and with the policy actions recently in the member countries. Our aim to find how strongly Japan was hit from the financial crisis and weather Japanese authorities reacted differently to the current crisis than during the 1990s or then authorities in other countries can be traced back to experiences made during the first financial crisis and what lessons have been learned from the experiences made during the 1990s. We find out that Japanese banks were hardly involved in the production and distribution of subprime related products and show how the financial crisis was hits to Japan through capital outflows. We argue that Japanese authorities reacted differently to the actual financial crisis than other central banks not because Japan was hitless badly by the crisis but because Japan learned from experiences made during the first financial crisis.

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WHY FINANCIAL CRISIS OCCER IN JAPAN: Understanding Japans financial crisis is critically important to us all as the world is currently mired in the global financial crisis. Somehow we need to bring to an end these never-ending financial crises which are simply tearing our world apart.

The starting point in understanding Japans banking crisis is the countrys post war banking culture. The government was fully motivated to push rapid economic reconstruction and development. It believed that banks should be key to financing that development. It thought that relying on stock and equity markets could be risky, as the government might have different priorities from individual investors.

FINANCIAL CRISIS IN JAPAN

LAHORE BUSINESS SCHOOL

GLOBAL ECONOMIC CRISIS HITS JAPANESE BANKS: Japan's stock market has been hit by extraordinary volatility, hitting a 26-year low, before recovering its losses the government stepped in to announce a series of emergency measures. Despite claims that Japan was well positioned to weather the crisis, the world's third largest economy is rapidly being dragged into the financial and economic maelstrom sweeping the globe. Japan is heavily dependent on exports, particularly to the US and Europe, where the economies are slowing rapidly. In 2007, export earnings accounted for two thirds of Japan's economic growth. Falling exports have already led to a second quarter contraction in the economy and many analysts are predicting worse to come. A major factor hitting Japanese exports is the strength of the yen against all major currencies including the US dollar. The yen hit 90.89 to the US dollar its highest value since August 1995. In the past three months, it has appreciated by 19 percent against the dollar, 32 percent against the euro and 33 percent against the British pound. Now, amid global investor panic and uncertainties, investors are getting out of riskier countries, particularly the so-called emerging economies and looking for safe havens. As a result, the carry trade is "unwinding". As money floods back into the yen, it drives the currency higher. This in turn encourages investors to avoid even higher payments by paying off their yen debts, causing the yen to rise even further. The steadily rising yen has been one of the indicators prompting a selloff of Japanese shares, particularly of the major exporters. The collapse of share values has opened up the first cracks in Japan's banking system, which previously appeared to be rock solid. Over the past two decades, Japan's major banks have purged their balance sheets of huge quantities of bad debt. They also had little exposure to the US subprime cr

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WHY WAS JAPAN HIT SO HARD BY THE GLOBAL FINANCIAL CRISIS?
Japan was hit by the global financial crisis even though its relatively resilient financial system initially limited the direct impact. The severe collapse of industrial production that followed was no doubt attributable to a confluence of factors, but the paper highlights the impact that came from the contractionary effect of global deleveraging on the real economy. In this environment, Japan was particularly vulnerable because of the structural changes that had taken place over the past decade in its trade and industrial structures. Vector auto regression analysis confirms that, as a result of these structural changes, Japanese output became much more responsive to output shocks in the advanced markets of the United States and Western Europe. The structural changes had two components. First, over 90% of Japan's exports consisted of highly income-elastic industrial supplies, capital goods, and consumer durables. Though emerging Asia is Japan's largest export market, its imports from Japan largely consist of intermediate goods used in the production of final goods destined for the US and Western Europe. Second, Japan's trade dependence had increased since the early 2000s, as evidenced by a rising export to gross domestic product ratio and a declining share for the non-tradable sector. Though increasing trade openness is a natural part of economic globalization and regional integration, the manner in which this process had played out made Japan particularly vulnerable to a negative demand shock coming from outside.

FINANCIAL CRISIS IN JAPAN

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RESPONSE AGAINST FINANCIAL CRISIS:

To make Japan more resilient to external shocks, policymakers could promote the export of finished goods to emerging Asia by establishing a region-wide free trade arrangement. To promote domestic demand, the social protection system needs to be strengthened so as to reduce households' uncertainty for the future; a more liberal immigration policy should help invigorate private investment in an aging society. To facilitate a better allocation of resources, further deregulatory measures in the more regulated non-tradable goods sector are called for; a substantial lifting of restrictions in agriculture, especially regarding the corporatization of production, would be especially helpful. With little available fiscal space, these measures will help create a climate in which private investment can flourish, driven by final domestic demand.

FINANCIAL CRISIS IN JAPAN

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FINDINGS
After the investigation of this report we just find that the policy measures taken by Bank of Japan and other central banks during the recent financial crisis different from the reactions by Japanese authorities in the 1990s. during the first financial crisis, the Japaneses interbank market almost collapsed when a securities house which acted as a borrower in the interbank market. Though the amount of the default was relatively small, lender banks preferred placing their money with the bank of Japan to lending in the interbank market for fear of being caught by another default. The consequence was that major financial institutions field almost on a weekly basis until bank of Japan studded in an injected massive liquidity into the market. All central banks reacted immediately after the collapse of the interbank markets might result in effect and financial system instability. Providing immediate financial assistance to banks was probably the first major lesson learned by Japanese authorities from the financial crisis of the 1990s.

FINANCIAL CRISIS IN JAPAN

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SUGGESTIONS/RECOMMENDATIONS
As we group members analyze the financial crisis of Japan that its have strong economy and have large industry like motor vehicle industry and strong banking sector. Japan recovers their recession area but at the end we suggest and recommend that first of all It will be suggested below that the main need to focus on Japan is that the economic model it originated remains to most outside observers, It has been the basis for rapid growth and development In East Asia was a significant factor in the emergence of the financial imbalances that contributed to the global financial crisis. Remains as an obstacle to the international diversification of demand that will be vital if global economic growth is to be maintained in the post global financial crisis environment.

A special fiscal package should be announced by the Central Government directed at

increasing public expenditure in ways which increases the income and consumption of the working people, especially the vulnerable sections, and ensure broad-based growth.

The Government has to undertake massive public investment directed at sectors which
are employment intensive and capable of creating employment demand for those likely to lose jobs in the export-oriented sectors.

FINANCIAL CRISIS IN JAPAN

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CONCLUSION
The global financial crisis is already causing a considerable slowdown in most developed Country like Japan. Governments around the world are trying to contain the crisis, but many suggest the worst is not yet over. Stock markets are down more than 40% from their recent highs. Investment banks have collapsed, rescue packages are drawn and interest rates have been cut around the world with Japan cutting theirs to all time low of 0.25% and 0.1% respectively in what looks like a coordinated response. With a recession already in place in most developed country Japan and other developing countries should try and come up with policies that will minimize the spread of this crisis to their economy.

FINANCIAL CRISIS IN JAPAN

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REFRENCESS

WEBSITES:
www.google.com www.wikipdia.com www.gstor.org www.stateinfo.blog www.economywatch.com

ARTICALS:

Japan's New Economic Challenge Author:Sheila A. Smith, Senior Fellow for Japan Studies November 25, 2008 Japan sure victim of global financial crisis www.chinaview.cn By Xinhua Writer Qi Wei The Implication of Global Financial Crisis on International Marketing Abubakar, M. (2008)

FINANCIAL CRISIS IN JAPAN