Make us your home page

Japan's lost decade serves as warning to America

WASHINGTON — Heavy government stimulus spending and near-zero interest rates did little to end a "lost decade" of stagnation and mushrooming debt in Japan. Some economists and lawmakers say the United States may wind up following the same trajectory.

Despite early signs of recovery and a strong U.S. stock market rally, fears persist that the failure to generate new jobs or ignite more consumer spending could drag the economy back into recession, or result in a protracted Japan-like period of poor economic and stock market performance.

The United States may already be in a lost decade — and not realize it yet.

About 7.3 million jobs have been lost since the recession began in December 2007. Just getting back to even and keeping pace with population growth could take many more years.

Japan is President Barack Obama's first stop on a tour of Asia starting Friday — and the gloomy world economy will be high on the agenda. Both Japan, starting in the 1990s, and the United States, in the most recent economic crisis, had credit and housing bubbles and both engaged in huge amounts of overborrowing leading up to sharp economic downturns. And both used historically low interest rates and government stimulus spending to try to lift their economies out of the ditch — with questionable results in Japan.

"It seems to me we are on the exact same path that the Japanese took in their 'lost decade' — of running up huge government debts, of not stimulating growth and at the end of the decade having this massive debt," said Kansas Sen. Sam Brownback, senior Republican on Congress' Joint Economic Committee.

Others cite differences in the U.S. and Japanese economies and business cultures to argue that things here are different and less susceptible to a prolonged period of economic lethargy.

While the debate rages, both sides agree Japan's painful experience offers the United States a lesson of how attempts at stimulus can go horribly wrong.

In the 1980s, Japan's factories were humming and its banks were the largest in the world by market capitalization.

Real estate and stock prices soared, and Japan was buying up large chunks of the United States.

Japan's bubble economy burst in 1990, and it lapsed into a lost decade that is fast becoming two lost decades.

Japan's older population means more government Social Security spending and a movement by older Japanese away from saving toward spending.

One other difference is that Japan's crisis was largely created by corporate debt excess, much of it borrowed against property with inflated prices, rather than personal debt and housing-market failures as in the United States.

Stock prices bottomed out in Japan in 2003 until hitting an even lower low in 2008. Japan's Nikkei stock index, now just under 10,000, still stands about 75 percent lower than where it was 20 years ago.

Years of expensive post-World War II spending on roads, dams and other projects, together with government stimulus spending to combat recessions, have left Japan with a national debt twice the size of its $5 trillion economy, the biggest deficit of any major economy.

The U.S. national debt of $12 trillion, by contrast, is approaching the size of the overall economy, $13.6 trillion as measured by the GDP. As staggering as that is, the ratio is half that of Japan's.

Japan's lost decade serves as warning to America 11/11/09 [Last modified: Thursday, November 12, 2009 7:06am]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.

Join the discussion: Click to view comments, add yours

  1. With successful jewelry line, Durant High alum Carley Ochs enjoys 'incredible ride'



    As a child Carley Ochs played dress up, draped in her grandmother's furs.

    Founder Carley Ochs poses for a portrait in her Ford Bronco at the Bourbon & Boweties warehouse in Brandon, Fla. on September 19, 2017. Ochs is a Durant High and Florida State University graduate.
  2. At Menorah Manor, planning paid off during Irma

    Nursing Homes

    ST. PETERSBURG — Doris Rosenblatt and her husband, Frank, have lived in Florida all of their lives, so they know about hurricanes.

    Raisa Collins, 9, far left, works on a craft project as Certified Nursing Assistant Shuntal Anthony holds Cassidy Merrill, 1, while pouring glue for Quanniyah Brownlee, 9, right, at Menorah Manor in St. Petersburg on Sept. 15. To help keep its patients safe during Hurricane Irma, Menorah Manor allowed employees to shelter their families and pets at the nursing home and also offered daycare through the week. The facility was able to accommodate and feed everyone who weathered the storm there. [LARA CERRI   |   Times]
  3. After Irma, nursing homes scramble to meet a hard deadline

    State Roundup

    TALLAHASSEE — Florida's nursing homes and assisted-living facilities find themselves in an unfamiliar place this week — pushing back against Gov. Rick Scott's administration over new rules that require them to purchase generator capacity by Nov. 15 to keep their residents safe and comfortable in a power …

    In this Sept. 13 photo, a woman is transported from The Rehabilitation Center at Hollywood Hills as patients are evacuated after a loss of air conditioning due to Hurricane Irma in Hollywood. Nine have died and patients had to be moved out of the facility, many of them on stretchers or in wheelchairs. Authorities have launched a criminal investigation to figure out what went wrong and who, if anyone, was to blame. [Amy Beth Bennett | South Florida Sun-Sentinel via AP]
  4. Trigaux: How Moffitt Cancer's M2Gen startup won $75 million from Hearst


    TAMPA — A Moffitt Cancer Center spin-off that's building a massive genetic data base of individual patient cancer information just caught the attention of a deep-pocketed health care investor.

    Richard P. Malloch is the president of Hearst Business Media, which is announcing a $75 million investment in M2Gen, the for-profit cancer informatics unit spun off by Tampa's Moffitt Cancer Center. Malloch's job is to find innovative investments for the Hearst family fortune. A substantial amount has been invested in health care, financial and the transportation and logistics industries.
  5. Three-hour police standoff ends, thanks to a cigarette


    TAMPA — A man threatening to harm himself was arrested by Tampa police on Tuesday after a three-hour standoff.