Can Japan Survive and Overcome Global Recession?
Just a couple of years ago, very few people expected that the US-based problem in housing and finance would grow to a full-scale financial crisis and global recession which seems almost certain today. There are four, mutually reinforcing channels through which the economic crisis can be transmitted from the US to the world economy: (1) global linkages of stock prices, (2) fluctuations in foreign exchanges, (3) increases in risk sensitivity, and (4) effects on the real economy (consumption, investment, exports and imports). First, regarding stock (asset) prices, many commercial banks, investment banks, insurance companies, hedge funds, and other financial institutions in the US are now facing severe capital deficiencies, and being questioned about their survival, making their depositors and creditors withdraw their money or assets from their accounts. In anticipating such behavior of their depositors and creditors, those financial institutions try to sell their own assets to raise cash
