October 19, 2008

JUST BECAUSE YOU MISUNDERSTOOD JAPAN THEN IS NO REASON TO MISAPPREHEND AMERICA NOW:

Life After the Bubble: How Japan Lost a Decade (JIM IMPOCO, 10/19/08, NY Times)

The notion of Japan as a threat, a ninja-like adversary along the lines that Michael Crichton described in “Rising Sun,” suddenly seemed silly. No one worries much about Japan taking over the world today. [...]

Still, America lacks several advantages Japan had as it grappled with the aftermath of its burst bubbles. The most obvious one is that Japan began its Lost Decade as the world’s largest creditor nation, and it still is. By contrast, America is now, as it was then, the world’s biggest debtor nation. Just to make the United States government run we need to borrow $2 billion a day from increasingly nervous lenders overseas, including the Japanese.

For the moment, it is in the best interest of America’s creditors to keep the spigot open, but when and if that changes, watch out. Some estimates have the federal deficit weighing in at over $750 billion next year.

That’s not the biggest ever as a percentage of total economic output, but it’s up there; and it’s not clear how that number is going to get smaller any time soon. What’s more, whereas America has a negative savings rate and its citizens are neck-deep in debt, the Japanese have remained fanatical savers, frugal to a fault.

That’s why when people ask me now if we are turning Japanese, I no longer tell them: “No Way!” Now I tell them: “If we are lucky.”


The notion of Japan as a threat was inane at the time, for all the reasons that comparing it to America now is ignorant.


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Posted by Orrin Judd at October 19, 2008 8:48 AM
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