The Japanese economy is stuck in a tailspin. With industrial output sinking 10.2 percent in January and 9.4 percent in February, economic activity could drop to half in another six months.
With interest rates close to zero, the Bank of Japan is trying to increase money liquidity by buying commercial paper and subordinated debt from financial institutions while the government is expanding quotas for credit guarantees to small and medium-size businesses as their business years close. But these measures aren't expected to provide much more than short-term relief.
As a result, hopes are growing for more steps to boost demand through Keynesian-style public spending. In fact, it almost looks like Japan, the United States, China and other major economies are competing to see how much sheer stimulus they can muster.
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