Analysis: Japan's lost decade still a risk for U.S. economy

Reuters ^ | 09/19/11

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Analysis: Japan's lost decade still a risk for U.S. economy

Mon, Sep 19 2011

By Steven C. Johnson

NEW YORK (Reuters) - As the U.S. economy slouches toward another recession and confidence in policymakers erodes, investors are coming to grips with the notion that the country may already be several years into a Japan-style lost decade.

If so, the years ahead could be a very tough slog. U.S. households, unlike those in Japan, have higher debts and lower savings, while massive deficits have sapped political support for the type of robust government spending Japan relied upon.

In short: in a prolonged period of anemic growth, the U.S. economy may have a slimmer margin for error.

"I'm more convinced we are headed in that direction," said Scott Mather, portfolio manager at PIMCO, the world's largest bond fund with $1.2 trillion in assets under management. "We might have an even harder time than Japan did."

Not all economists believe the United States will repeat the Japanese experience, but markets have been flashing warning signs.

Three years after the United States' housing bubble burst, 10-year Treasury yields are struggling to stay above 2 percent, while stocks have declined every month since April.

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Japan's lost decade still a risk for U.S. economy

What? 'Lost decade' is the best theoretically possible case scenario for U.S.. Realistically there is no chance that this will be the case. It would be worse.

Once I made a comment along this line, and there were many who were not happy to hear it.

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P!

[Jim from C-Town]

It has been three years, we are 30% there already.

[DB]

More like lost two decades. The Japanese stock market peaked in 1990 and is today only about 1/4 of what it was then.

That’s more than 20 years ago...

[DB]

Japan has been in a funk for more than 20 years. They did exactly what Obama is trying to do today - they tried to spend their way out of it - and it was a spectacular failure and as a result they are buried in debt that they haven’t been able to get out from under.

[BfloGuy]

Unemployment is at 4.6% in Japan. The "lost decade" baloney results from the Keynesians' inability to understand what an economy without government-created inflation looks like.

It isn't stagnant. Prices just aren't going up.

[NVDave]

You have to understand that in Japan, there are many more women who say “I am a housewife, I’m not part of the labor pool” and that helps keep down unemployment stats.

http://www.boj.or.jp/en/research/wps_rev/rev_2010/data/rev10e07.pdf

Second, Japan is undergoing a slow-motion demographic collapse (ie, a declining population of young people) and they don’t allow much immigration.

http://www.china-sds.org/kcxfzbg/addinfomanage/lwwk/data/kcx1214.pdf

So their low unemployment rate masks a much larger problem: They have lots of old people depending on the working taxation of a shrinking number of young people.

[4rcane]

we get argentina, not japan. Japan is wishful thinking

[RayChuang88]

A big issue in Japan is that they should have cleaned up their income tax code when their speculative bubble "burst" around 1990.

That's why the USA needs a tax code that is friendly to all businesses like the Forbes no-loophole 17.5% flat-rate income tax plan--a plan that encourages savings and investment in the USA and frees up over US$200 billion per year now spent on income tax compliance for more productive uses.

[sergeantdave]

One big difference between Japan and the US is that America is sitting on trillions of dollars of natural resources. Drilling, mining and logging are wealth multipliers. I’ve heard there’s enough coal in Alaska alone to pay off the debt to China.

The key, of course, is to destroy the eco-fascist cult. Al Gore is a clown, and he’s self-destructing. I’ll do my part to squash these Nazi insects.

The second key is destroying the Goebbel’s propaganda press. Ad revenue for the dinosaur media is dropping through the floor, and the poodle scribblers are terrified. They know the tar pits are waiting for them. Another good push and they’re dead.

[Jim from C-Town]

Exactly. They also have a negative birth rate, so they have many more older people than younger people. Four grandparents have two children who have one grandchild = social decline and failure in as little as two generations.

Thanks to birth control and rampant abortions.

China has an even starker decline in birth rate making them a ghost country by mid century. They have the compounded problem of tens of millions more men than women.