How could this have been avoided
1.Policy mistakes: Mismanagement of macroeconomic policies Prematurely Opening Up Capital Projects and Misguided Yen Internationalization Path Bubble burst rescue measures are too prolonged 2.Supervision mistakes: Balance financial supervision and financial freedom Regulating credit business of financial institutions
Famous asset bubbles in history
1、Tulip mania
Contract price for some fashionable tulip reached extraordinary high levels The upsurge in buying tulips spread to the national movement The price then dramatically collapsed in Feb.1637.
Government role
1.Cutting interest rates
From January 1986 to February 1987, the Bank of Japan cut interest rates for the five time in a row, reducing the central bank discount rate from 5% to 2.5%.
popular，which followed by numbers of “Bubbles Company” to
absorb funds at the same time.
The congress banned the “bubbles company” to govern the market
Famous asset bubbles in history
3、South Sea Bubble
The South Sea Company launched a plan to exchange national debt
in its share with the government, prompting its share to be more
turmoil. Stock price fell and investors were in heavy debt.
Famous asset bubbles in history
4、 Economic Bubble in Japan
During 1985-1989, the Nikkei Dow Average rose by 2.7 times. During 1986-1990, the average price index of Tokyo, Osaka and other six cities increased by more than 3 times. In 1991, land price began to fall sharply of more than 46%.
The Asset Bubble in Japan
Wu Haonan G1701257L
Yang Chen G1700612F Liu Yunting G1700629E Ali Asad aun G1700599L
What is asset bubble？
The asset bubble is an upward migration of the
market price level of certain assets relative to the
theoretical price
The emergence of asset bubbles often causes
residents to feel the false sense of increasing wealth.
3.Cutting banking loans
The Bank of Japan raised the discount rate of the central bank from 2.5% to 6% five times, and Japan's Tibetan province required all financial insal estate loans. The Bank of Japan asked all commercial banks to cut down the loans substantially.
Characteristics of Japan‟s asset bubble
1980s boom and the bursting of the asset price bubble 1.Plaza Accord made yen appreciated sharply 2.Low interest rates give further stimulus
Famous asset bubbles in history
2、Economic Bubble in Mississippi
The company„s stock can be purchased at par value with the treasury volume, and
the speculative tide began to sweep across France.
2.Expansionary monetary policy
In response to possible inflation, the Bank of Japan decided to continue expansionary monetary policy and maintain the discount rate unchanged at an ultra-low level of 2.5%.
Characteristics of Japan‟s asset bubble
1990, the “lost decade” 1.Low GDP growth
Characteristics of Japan‟s asset bubble
1990, the “lost decade” 2. High banking and corporate debt
The higher the price of Mississippi shares, the more money banks issue simultaneously.
Stock speculators exchanged coins to ship abroad. Mississippi‟s share price plunged. State council depreciated paper money by 50%.