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The Bubble Economy and the Lost Decade: Learning from the Japanese Economic Experience

The Bubble Economy and the Lost Decade: Learning from the Japanese Economic Experience. William M. Tsutsui University of Kansas. Plan for this Session. Japan postwar “miracle” economy (1950s to early 1970s) The “Bubble Economy” (late 1980s)

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The Bubble Economy and the Lost Decade: Learning from the Japanese Economic Experience

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  1. The Bubble Economyand the Lost Decade:Learning from the Japanese Economic Experience William M. Tsutsui University of Kansas

  2. Plan for this Session • Japan postwar “miracle” economy (1950s to early 1970s) • The “Bubble Economy” (late 1980s) • The “Lost Decade” (1990 to early 2000s, or still ongoing?) • What did the Japanese do wrong? • What can we learn from Japan’s experience?

  3. The immediate postwar economy

  4. The beginnings of the “miracle”

  5. The Elements of Growth • Trade policy, human resources, the “free ride” • Open world trading system • Entrepreneurship • Consumption • The bureaucracy, “industrial policy” and the “developmental state” (Chalmers Johnson)

  6. Unique Structural Features • Japanese Employment System: lifetime employment, seniority system, company unions • Keiretsu • Corporate finance and banking system • The dual economy

  7. Unique Structural Features • Japanese-style management • Japanese democracy: the Liberal Democratic Party • Social consensus on growth

  8. An economic coming of age

  9. The export economy

  10. The big ’80s in Japan

  11. How did it get so bad? • Inept public policy • Corruption • Greed • The belief that Japan was somehow “different”

  12. When the bubble burst

  13. Nikkei Average (Tokyo Stock Exchange)Source: http://brual.files.wordpress.com/2008/09/nikkei-average-historical-graph.png

  14. Japanese Real Estate PricesSource: http://m1.smartmoney.com/tradecraft/images/1107-graphic.gif

  15. Japanese GDP Growth RateSource: http://www.treasury.gov.au/documents/817/images/05_article_4-18.gif

  16. Japanese manufacturing

  17. The government response

  18. Source: http://www.heritage.org/Research/AsiaandthePacific/images/bg1530cht5.gif

  19. Source: http://bilbo.economicoutlook.net/blog/wp-content/uploads/2009/04/japan_interest_rates.jpg

  20. The banking crisis

  21. So what went wrong? • Government incompetence • Lack of decisive action? • Political failures

  22. Japanese Prime Ministers, 1989-2001

  23. So what went wrong? • Structural peculiarites of the Japanese economic system • What about the Japanese people? Should they have spent more and demanded more?

  24. Social fallout of the bubble economy

  25. Aum Shinrikyo and the Kobe earthquake (1995)

  26. Enjo kosai “compensated dating” • Hikikomori “acute social withdrawal” • Tokokyohi “school refusal”

  27. Source: http://www.japan-zone.com/features/pix/005/population_aging.gif

  28. What lessons should we learn? • Greed is universal. • Hindsight is 20/20. • The market can’t solve everything. • The government can’t solve everything. • Quick fixes probably won’t fix it. • Watch out for the social fallout of economic distress.

  29. Not all stories have happy endings.

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