The Effects of Price Control In Japan

If supply is great than demand, the value of a product impart decrease. If demand is greater than supply, the monetary value of a product will increment. This is a transparent rule that determines the monetary value of almost entirely consumer goods. save what happens if the p sieve is too high. What happens if there is a grand shortage or if a war breaks out and the price of everyday products such as wampumpeag or bread skyrockets. Who will nurse the consumer? And vice versa, who will protect the seller.This is where the governance steps in and imposes price controls. toll controls are imposed to help or protect particular parts of the population which would be treated unequally by the unfettered price system. With todays technology, umpteen farmers virtually the world find themselves producing far much than they can sell or a exorbitance and this drives rectify prices. Therefore to obtain the farmers, many political sciences have created price floors to increas e the income of their farmers who without them would fail to make a living(a) profit.Japanese rustic insurance insurance policy so far has focused on maintaining awkward income by price controls. During the 1960s, Japan was in a stage of extraordinarily speedy growth. But Japanese farmers still produced much crops, namely rice, then they could sell, and this drove prices down and dwindled their profits. All the while, the industrial sector began creating massive profits. As a result, the income gap in the midst of the two was widening. Politicians knew that social and political upheaval would result if the situation worsened.And so they began to utilize to price controls to protect agriculture. To increase the farmers income, the presidency placed price floors or price supports on rice and other crops. Therefore, the price of rice would not be unyielding by the free market notwithstanding by this set price. The Japanese political sympathies set the price floor higher(p renominal) than the equilibrium price or the price of rice in the free market. By doing this they were sure to increase the income of farmers. But this policy had its draw behinds. The price policy impaired the introductory market mechanisms.The increased price move away buyers, resulting in an excessive surplus of rice. In f acquit, rice surplus amounted to close to seven million tons in storage, and that required three trillion languish of tax money for its disposal. Although this policy helped farmers, it became a great strain on the government and taxpayers. The Japanese government began to implement a new policy. The only way to nullify surplus under such a high price policy is to go down achievement. Hence, a policy to cut back on rice acreage was introduced. But this policy also ran into problems.Reduced mathematical product was forced onto the producers and served only to dampen their penury to produce and to hinder their drive. Another birth control device in pri ce control is a segregated overseas and domestic market. The only way for the government to retain this variety show of price policy and maintain agricultural income is by closing off its borders take a hop imports. With this price control the government ran into many problems. It therefore abolished the Food Staple view Act which implemented this price policy and replaced it with the New Food Staple function Act in November 1995.This new act liberated distribution and limited the governments agency to just the purchase and management of rice reserves. In conclusion, Japans price control policy was created with the best intentions to improve agriculture income. era it succeeded in that aspect, the government and its people were damage more by this policy. Even the farmers themselves who had their production limited became unmotivated. We see from this case scenario that sometimes the government needs to take a step back and play a limited role in the preservation or practice laissez-faire economics.