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People who bought the Nikkei index in the early 1990s are still waiting for the correction to end...
by f00zz 7y ago
People who bought the Nikkei index in the early 1990s are still waiting for the correction to end...
- mywittyname 7y agohttps://dqydj.com/nikkei-return-calculator-dividend-reinvestment/ https://dqydj.com/nikkei-return-calculator-dividend-reinvest... After dividends, you broke even after inflation (-0.096% return) if you dumped your life savings into the Nikkei in Jan 1990 and never invested another dime. But if you kept investing incrementally over the years, like most people do, then annual returns went to 2.5% after inflation in 1995-2000, to 6.5% in 2005 and 9.4% in 2010.
- rchaud 7y agoGood point. The Japan case is a weird one. There's a Paul Krugman essay from the '90s that argues it's partially due to a historically high savings rate among Japanese consumers[0]. A good chunk of their boom was export-driven after all. Loosening monetary policy to fight deflationary pressure in the '90s also didn't seem to work because interest rates were already near zero. I think the US is different because the benchmark Fed rate is 2.25% now after many years of near-zero rates. So there's room to cut rates if needed. [0]: http://web.mit.edu/krugman/www/nikkei.html http://web.mit.edu/krugman/www/nikkei.html
- f00zz 7y agoInterestingly, it could also be argued that the breakneck economic growth that some Asian countries went through (in the case of Japan, at least until the 1990s) can be partially attributed to their high savings rate. [0] [0]: https://en.wikipedia.org/wiki/Harrod%E2%80%93Domar_model https://en.wikipedia.org/wiki/Harrod%E2%80%93Domar_model