Sunday, July 10, 2011

This Time, Japan’s Economic Gloom Runs Deeper

TRADERS here are fond of joking that no one has lost money betting against Japan since the collapse of the bubble economy of the 1980s.

More than two decades later, the Nikkei 225 stock index is still three-quarters off of its peak. And the economy has been hit by blow after blow, from sagging property prices to mounting debts and intensifying competition from China.

Add an aging population, a lack of jobs for college graduates and persistent deflation and you can see why Japan’s so-called lost decade is a misnomer. Japan has lost decades — plural, not singular.

Natural disasters could be added to the list of economic shocks, notably the earthquake that leveled Kobe in 1995, and, in March, the earthquake and tsunami in northeastern Japan and the nuclear crisis in Fukushima that followed.

In a perverse way, after suppressing growth initially, Japan’s catastrophes have repeatedly jump-started the economy. But such good times generally have not lasted. Japan’s economy rebounded in late 1995 and 1996, for example, before tax increases and the Asian financial crisis plunged the country back into recession, a roller-coaster ride that I covered as a reporter here. (read more)