In Japan’s Stagnant Decade, Cautionary Tales for America

The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

By then, Tokyo’s main Nikkei stock index had lost almost three-quarters of its value. The country’s public debt had grown to exceed its gross domestic product, and deflation stalked the land. In the end, real estate prices fell for 15 consecutive years.

More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”

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Posted in * Economics, Politics, * International News & Commentary, America/U.S.A., Asia, Economy, Japan, Office of the President, Politics in General, President Barack Obama, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The Fiscal Stimulus Package of 2009, The Possibility of a Bailout for the U.S. Auto Industry, The September 2008 Proposed Henry Paulson 700 Billion Bailout Package

2 comments on “In Japan’s Stagnant Decade, Cautionary Tales for America

  1. Jeffersonian says:

    You’re assuming the objective of the porkulus bill is economic stimulation, Dr. Harmon. It’s not. The objective is political centralization in the hands of the Democratic Party. I think it has a very good chance of succeeding in that regard.

  2. Sick & Tired of Nuance says:

    But it is different this time. Why, we are Americans. It’s totally different. There is a whole ocean between us and them. They are an island. They are asians and we are a polyglot. [/sarcasm]