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As you might be aware Japan had a “lost decade” during the 90s. It experienced almost no growth of the GDP. There are many theories as to why, but the most conv
by nhaehnle 15y ago
As you might be aware Japan had a “lost decade” during the 90s. It experienced almost no growth of the GDP. There are many theories as to why, but the most convincing one is: The Japanese “Baby Boomers” retired during this decade.
Richard Koo has a different view on this, one that should also inform the thinking in the US and rest of the Western world these days. According to him, the Japanese "lost decade" was caused by an asset price bubble collapse in housing. The parallels to the global financial crisis are fascinating.
See, for example, his talk which is linked here: http://seekerblog.com/2009/04/11/richard-koo-more-on-the-balance-sheet-recession/ http://seekerblog.com/2009/04/11/richard-koo-more-on-the-bal...
- emanuer 15y agoYes I am aware of this point of view. I think, the trigger for the lost decade can be attributed to the housing bubble. Yet, the almost complete stop in the GDP's growth and the complete immunity to monetary stimuli (~0% interest rate for 20 years) are impossible to explain by the bubble collapse.
- bzbarsky 15y ago~0% interest rate doesn't imply monetary stimulus. At least not when the rate gets hiked as soon as inflation goes over 0% or so, which is what the Bank of Japan has been doing. In other words, BoJ has _explicitly_ targeted stable to falling prices in its monetary policy. That's not monetary stimulus; that's just contractionary policy. What interest rate target they use to implement that policy isn't really relevant.