Japan's Economic Woes Offer Lessons To U.S.
In the 1980s, Japan appeared to be a world beater — the China of its day. Japanese companies were on a tear, buying up firms in the U.S. and property around the world.
But these days, Japan is considered a cautionary tale for post-industrial economies around the world. The country is facing its fourth recession in what are commonly known as the "lost decades."
Japan's story resonates this holiday season as American politicians try to reach a debt deal.
"I really hope the U.S. is not getting into a Japanese situation," says Hiromichi Shirakawa, chief economist for Credit Suisse in Japan.
Shirakawa says a rapidly aging society, rising public spending and political paralysis have contributed to years of stagnation in Japan and that Americans should pay attention.
"If you look at some economic indicators, they're very, very similar," he says. "My concern is the U.S. economy may — not will — may follow the Japanese economy's path."
Over the years, the economies of Japan and the U.S. have faced some similar problems, albeit at different times and to different degrees.
Both had real estate bubbles that burst and banking systems that racked up tons of bad loans. Both Japan and the U.S. also have ultimately unsustainable public debts. Shirakawa says Japan's economic problems are about 10 years ahead of America's.
"The American people should learn from Japan that the economy could be like Japan without the political will to change the economic system," he says.
A Rapidly Aging Society
Robert Feldman, chief economist for Morgan Stanley MUFG Securities in Tokyo, says one big problem is Japan is rapidly aging, driving up health care and pensions costs. But the country's electoral system favors the elderly, so most politicians are afraid to slash services.
"It means they can't cut medical benefits, even though they are overgenerous," he says. "There's only a 10 percent copayment for older people when they go to the doctor, and they pay no insurance premiums."
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