The Revised Lending Law and Japanese GDP and Employment

Using Ripple Effect Analysis of Specific Industry

Abstract

The purpose of this article is to analyze the effect of the revised lending law in Japan on Japanese GDP and employment using input output analysis (an equilibrium model, ripple effect analysis of specific industry). Kato and Iida (2010, Survey of Annual Bulletin (JAPF) in Japanese) analyzed the effect using general input output analysis (an equilibrium model, ripple effect analysis of specific demand (expenditure))).Kato and Iida (2010) show that the consumption decreased by prohibiting loan (the regulation in the amount of loan) strengthened and the upper limit interest rate (the upper limit interest rate regulation) lowered. However, there is debate whether the effect size is reasonable or not. Therefore, we paid attention to the fact that loan suppliers decreased sharply and then we evaluate the size of the effect by using input output analysis (an equilibrium model, ripple effect analysis of specific industry).We show that during 2006 and 2011, the GDP decreased by 0.2452 and that employment also lowered by 112707 (mainly in the case of the upper limit interest rate regulation).