Japan's Lost Decade

In the 1970s, Japan was a global powerhouse only rivaled by the US. It produced the world's second-largest gross national product (GNP) after the United States and in the 1980s, it ranked first in GNP per capita worldwide. However, in the early 1990s, Japan's growth stalled for more than 10 years, and this period has been termed the Lost Decade. Economist Paul Krugman states that, "the lost decade was caused by consumers and companies that saved too much and caused the economy to slow." Other economists blame the country's Bank of Japan's lack of immediate intervention for exacerbated problem. Many of these factors probably contributed to Japan's economic recession.
This Lost Decade has been compared to the US's 2008 recession. However, the US was able to recover from the economic crisis much more easily because it has plenty of young workers entering the workforce. Furthermore, The US Federal Reserve acted faster than the Bank of Japan. Furthermore, the US benefited greatly from globalization, and interaction with other countries helped support it in its crisis. However, Japan was isolated from the outside world, so the recession hit it much harder, with the average income dropping drastically. Because of the lack of workers entering the workforce, Japan's attempts to spend on public works projects didn't help it recover from its recession. Furthermore, Japan had much higher levels of debt than the US, so the recession hit it much harder.
Even now, Japan's economy is still struggling, largely due to its aging population and low birthrate. Rather than joining society, many of Japan's youths choose to live in a shut in lifestyle, where they remain in their homes until they die. This hurts its economy, as there are people who use social services without contributing much to society. If this trend continues, Japan will only continue to decline from its once world powerhouse position. In order to prevent any more more recessions, we need to be prepared to act quickly, and must invest in a strong and talented workforce.

Source:
https://www.thebalance.com/japan-s-economy-recession-effect-on-u-s-and-world-3306007

Comments

  1. AnonymousMarch 21, 2019 at 3:26 PM

    Interesting post, Joon! I found an article that compared the Lost Decade to the Great Recession in the US, and it's fascinating how similar both of them are. Both countries experienced a drop in their economies: the US saw a drop in levels of GDP per capita, while Japan saw a sudden drop in growth rate. While GDP had been stable in Japan during this time period, their exponential growth from the previous time period halted. The pre-1990 growth rate was that they doubled their economy every 14 years, while after 1990, they were on track to double every 80 years. After looking at the numbers, it was estimated that it would take the Japan about 470 percent more time to double than beforehand, which was detrimental to it's economy (especially since they had banked on their growth to continue for decades).

    Source: https://www.stlouisfed.org/on-the-economy/2018/june/japan-lost-decade-us-great-recession

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