The central bank of Japan(Bank of Japan) has tried to lower interest rates to get more money flowing through Japan but this has not got them out of the recession. In 1991 the short-term interest rates were at 8.3%, and down to almost zero in the beginning of 1999. In mid 1999 the two year government bond rate was at only 0.48%. The corporate bond rate was at 0.80%. These rates are extremely good for people borrowing money but not good for their economy. It's hard to understand why the economy is still in a slump if the rates are so low. An explanation could be th

Many people have different ideas to solve this problem. One such idea is to for the Bank of Japan to bring inflation and inflationary expectations up to 4% and make them stay there for fifteen years. This would be much different than the interest rates of virtually zero as it is. The liquidity trap could be solved with this method, but why are they in a liquidity trap? The money put in the economy by the Bank of Japan has not been effective in raising the growth rate of broader money aggregates. The monetary base grew 25% between the years of 1994 and 1997. During this time the broader money aggregate grew only 11%, and the bank credit did not grow at all. In the years from 1998 to 1999 an expansion of the monetary base averaged about 8% to 10%, and ended up in a 3% growth in the broader monetary aggregate.

at the traditional monetary policy is powerless to provide enough effect to stimulate the

Some common words found in the essay are:
Bank Japan, JapanBank Japan, , credit crunch, liquidity trap, money economy, stimulate economy, monetary base, broader money, borrowing money, lower rates, bank credit, bond rate,
Approximate Word count = 612
Approximate Pages = 2 (250 words per page double spaced)