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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
The Bubble Economyand the Lost Decade:Learning from the Japanese Economic Experience

William M. Tsutsui

University of Kansas

plan for this session
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?
the elements of growth
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)
unique structural features
Unique Structural Features
  • Japanese Employment System: lifetime employment, seniority system, company unions
  • Keiretsu
  • Corporate finance and banking system
  • The dual economy
unique structural features1
Unique Structural Features
  • Japanese-style management
  • Japanese democracy: the Liberal Democratic Party
  • Social consensus on growth
how did it get so bad
How did it get so bad?
  • Inept public policy
  • Corruption
  • Greed
  • The belief that Japan was somehow “different”
slide15
Nikkei Average (Tokyo Stock Exchange)Source: http://brual.files.wordpress.com/2008/09/nikkei-average-historical-graph.png
japanese real estate prices source http m1 smartmoney com tradecraft images 1107 graphic gif
Japanese Real Estate PricesSource: http://m1.smartmoney.com/tradecraft/images/1107-graphic.gif
japanese gdp growth rate source http www treasury gov au documents 817 images 05 article 4 18 gif
Japanese GDP Growth RateSource: http://www.treasury.gov.au/documents/817/images/05_article_4-18.gif
source http www heritage org research asiaandthepacific images bg1530cht5 gif
Source: http://www.heritage.org/Research/AsiaandthePacific/images/bg1530cht5.gif
source http bilbo economicoutlook net blog wp content uploads 2009 04 japan interest rates jpg
Source: http://bilbo.economicoutlook.net/blog/wp-content/uploads/2009/04/japan_interest_rates.jpg
so what went wrong
So what went wrong?
  • Government incompetence
  • Lack of decisive action?
  • Political failures
so what went wrong1
So what went wrong?
  • Structural peculiarites of the Japanese economic system
  • What about the Japanese people? Should they have spent more and demanded more?
slide28
Enjo kosai “compensated dating”
  • Hikikomori “acute social withdrawal”
  • Tokokyohi “school refusal”
source http www japan zone com features pix 005 population aging gif
Source: http://www.japan-zone.com/features/pix/005/population_aging.gif
what lessons should we learn
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.