Introduction

This report aims to analyse the economic trends of inflation, GDP and unemployment for the
countries Germany and Japan. This report will be based on data retrieved from OCERD.com from the
year 2005 till 2018. The report will also be discussing the fiscal and monetary policies for both
countries and what effects do these policies bring about. In the final part of the report, the
relationship between GDP and the variables (Merchandise Exports, International Tourism and Health
Expenditure) will be shown. It will also explore the extent which real GDP can be predicted using the
variables.
Based of Chart 1, it is shown that Germany and Japan endured a recession from year 2007 to 2009 as
a result of the Subprime Mortgage Crisis in the United States. According to Fukao & Yuan (2009), Japan
fell into recession due mainly to the countries fall in exports. Most of the drop in Japan’s exports was
caused by a sharp decline in overseas demand for motor vehicles, information technology, and capital
goods as firms and consumers postponed or cancelled their purchases due to the current economic
climate (Sommer,2009). Also, the appreciation of the yen drove investors away (Ogura and Lah, 2008).
Moreover, the financial market stalemate that resulted from the Lehman shock limited the availability
of trade finance (Saito, 2018). As for Germany, Dempsey (2008) has stated that there was a decrease
in exports while there was a major increase in imports, as stated by the statistics office. Timo Klein, a
senior economist has also stated that investments has dropped by 7 to 8 percent in the production
sector (Dempsey, 2008). However, both countries experienced a significant rise in GDP in 2010. Japan
achieved this through a significant rise in exports mainly to China and other East Asian economies
(Patrick, 2010), while Germany had a rise in international trades, local demands and capital
investments (BBC, 2011).

Both data sets are unevenly distributed due to present outliers (-5, 3,4) which might affect the mean
value. Therefore, both medians (1.35, 1.92) are used to measure average value. Both data are also
negatively skewed as both medians > mean. Both kurtosis > 3. Both are leptokurtic distributions. Both
standard deviations are small, and observations fall around the mean value.
 From 2005 to 2018 it is shown that Japan’s overall unemployment rate is low while Germany’s
overall unemployment rate has fallen. In 2009, Germany and Japan had cyclical unemployment due
to the ongoing recession. Despite the ongoing recession at that moment, its impact on employment
was surprisingly limited in both countries. In Japan, this was mainly due to the lifetime employment
system and government policies that exists (Saito, 2018). Also, Germany’s constant decline in
unemployment was attributed to government policies. These policies will be illustrated further in
next section.

Germany is unevenly distributed due to presence of outliers while Japan is evenly distributed.
Germany will use median while Japan will use mean as measurements for average value. Japan is
nearly symmetrical as skewness (-0.14) is close to 0 and median is close to mean. Germany mean >
median. Germany is positively skewed. Both kurtosis < 3 and are platykurtic distributions. Japan has
observations falling around the mean value while Germany has values further from the mean value.
Based on Chart 3, from 2005-2017 Japan and Germany’s Inflation rate fluctuates. As for Japan, in
2008, the rise in price of oil and food which was because of global factors led Japan’s inflation rate to
increase (Nytimes.com, 2008). Also, in 2009, Japan suffered from deflation as unemployment soared
due to the recession and consumers refused to spend even with government handouts. (McCurry,
2009). In 2011, Japan endured cost push inflation as the demand for food and energy increased due
to the tsunami (Kollewe, 2011). As for Germany, in 2008, inflation on rose a small amount and in
2009, Germany was facing a huge fall in inflation rate. According to Carare and Danninger (2008),
inflation rate will slow down due to constant administrative prices, tax effects are decreased due to
the price increase by firms the previous year and a slowdown in global economy growth will cause
prices to fall. In 2009, the recession is the main cause of Germany’s fall of inflation rate, along with
excess supply of goods and services and weakening of economic trends (German Consumer Prices
Fall For First Time in 22 Years, 2009).

Both countries are unevenly distributed due to present outliers which are extremely small or large.
Median is used to measure average value. Japan mean > median. Japan is negatively skewed.
Germany median > mean. Germany is positively skewed. Both has kurtosis < 3. Therefore, they are
platykurtic distributions. Both has values which are further away from the mean value.
Fukao, K. and Yuan, T. (2009). Why has Japan been so hard hit by the global crisis?. [online]
Voxeu.org. Available at: https://voxeu.org/article/why-has-japan-been-so-hard-hit-global-crisis
[Accessed 17 Dec. 2018].

Nytimes.com. (2008). Japan's inflation hits decade high in February. [online] Available at:
https://www.nytimes.com/2008/03/28/business/worldbusiness/28iht-28jpecon.11489303.html
[Accessed 17 Dec. 2018].

Kollewe, J. (2011). Japan overcomes deflation for first time in two years. [online] the Guardian.
Available at: https://www.theguardian.com/business/2011/may/27/japan-overcomes-deflation-
food-energy-shortages [Accessed 17 Dec. 2018].

McCurry, J. (2009). Japan heads for worst recession since the second world war. [online] the
Guardian. Available at: https://www.theguardian.com/business/2009/jan/30/japan-recession
[Accessed 17 Dec. 2018].

Ogura, J. and Lah, K. (2008). Japan's economy contracts, falls into recession. [online]
Money.cnn.com. Available at:
https://money.cnn.com/2008/11/16/news/international/japan_recession/index.htm [Accessed 13
Dec. 2018].

Patrick, H. (2010). The Japanese economy’s recovery. [online] East Asia Forum. Available at:
http://www.eastasiaforum.org/2010/11/20/the-japanese-economys-recovery/ [Accessed 17 Dec.
2018].

Saito, J. (2018). Why Was Japan Struck So Hard by the 2008 Crisis?. [online] Japan Center For
Economic Research. Available at: https://www.jcer.or.jp/english/why-was-japan-struck-so-hard-by-
the-2008-crisis [Accessed 13 Dec. 2018].

Sommer, M. (2009). Why Has Japan Been Hit So Hard by the Global Recession?. IMF Staff Position
Notes, 2009(05), p.2.