Reading Passage Question
Japan is making a comeback. After 15 years in a weak economic state, signs of life are finally beginning to show. Deflation is over; prices are no longer falling.
Japan is the second largest economy in the world and its recent growth is very good news. The rest of Asia and manufacturers in America will undoubtedly benefit. American consumers had been carrying the majority of the responsibility to keep the global economy moving. Now Tokyo appears to be engaging in real consumption: an indicator that renewal is upon the Japanese economy.
Japan’s economy barely grew at all in the 1990s. Deflation plagued the country for years with plummeting prices, which reduced wages and corporate income and made debt all the more heavy. Real estate prices fell for 14 years in a row, amounting to a decline of about 60% over that time. The Nikkei index of stock prices fell from an all-time high of 39,000 to below 8,000 before climbing back to about 17,000.
It was a bizarre time. Japan lowered interest rates again and again until they hit zero in 2001. Bond prices fell so low that by 2003, even 30-year government bonds yielded less than 1%. Economic historians were known for saying that the cost of borrowing money had never been so low — not in the financial transactions of ancient Greece or Rome or China, or anywhere else in recorded history. And even so, zero interest rates continued. Only now are Japan's bankers talking about the possibly of lifting rates by a quarter of a percent in the coming months.
This month, Japan's central bank finally put a stop to ‘quantitative reasoning,’ a 50-year old policy of pushing excess money into the financial system. Japan was able to do so because consumer prices have recently begun to rise, slowly but surely.
Japan’s population is aging and its public debt will continue to trouble the country in the long-term. But in the short term American politicians will almost certainly once again begin fussing about the miracle of the Japanese and complaining about Japan grabbing up U.S. properties.
“Japan is making a comeback.”- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.
This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.
Solution and Explanation
Question 1
Which of the following best describes the effect Japan’s new economy has had on American manufacturers?
- triumph
- setback
- fear
- resentment
- relief
Answer: E
Explanation: After 15 years of declining economically, Japan staged a comeback. Finally, life has started to emerge. Prices are no longer decreasing, and deflation has ended. The economy of Japan is currently the second biggest in the world. The majority of the burden for maintaining the momentum of the global economy has been placed on American consumers. Tokyo now seems to be participating in genuine consumption, which is a sign that the Japanese economy is about to undergo rebirth. Japan's central bank officially ended the 50-year practise of "quantitative reasoning," which involved injecting surplus funds into the financial system.
Question 2
According to the passage, quantitative reasoning is no longer necessary because:
- The central bank decided it was useless
- The strategy no longer fit the times.
- Excess money was causing inflation.
- Prices increased enough to compensate for it
- The policy stopped consumers from purchasing.
Answer: D
Explanation: Finally, the Japanese central bank put an end to "quantitative reasoning." A fifty-year-old practice of introducing surplus funds into the financial system. Japan was able to do so due to recent slow-but-steady increases in consumer prices.
Question 3
The author believes that Japan’s current financial state is:
- doomed.
- secure.
- hopeful.
- dangerous.
- flourishing.
Answer: C
Explanation: In the first paragraph the author says ‘signs of life are finally beginning to show.’ The final paragraph tells us that Japan’s public debt makes its future uncertain, but for now American politicians see the country as a threat. Choice (C), “hopeful,” is the correct answer.
Question 4
The author’s writing style indicates that the passage is meant to
- celebrate
- criticize.
- describe.
- advocate.
- compare.
Answer: C
Explanation: Japan is making a return, the author writes in the opening paragraph. After 15 years in a precarious financial situation. The second paragraph explains how the nation has recovered so effectively from its economic collapse and has grown to be the second-largest economy in the world. According to the author, Japan's economy increased very little in the 1990s. Years of deflation affected the nation with falling prices, which decreased salaries and corporate income and increased debt 14 years in a row saw a decline in real estate values. The Nikkei stock price index dropped from its record high to below 8,000. Japan was experiencing an odd period. The last paragraph states how Japan’s population is ageing and its public debt will continue to trouble the country in the long-term. This supports option C.
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