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Structural Roots of Japan’s Malaise

Structural Roots of Japan’s Malaise. Richard Katz The Oriental Economist Report Rbkatz@ix.netcom.com. Brookings Institution April 9, 2002. I. How Bad Is It?. Private Recovery Never Happened. Five-Year Growth Turning Negative. Japan’s Lost Decade vs. Others’.

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Structural Roots of Japan’s Malaise

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  1. Structural Roots of Japan’s Malaise Richard Katz The Oriental Economist Report Rbkatz@ix.netcom.com Brookings Institution April 9, 2002

  2. I. How Bad Is It?

  3. Private Recovery Never Happened

  4. Five-Year Growth Turning Negative

  5. Japan’s Lost Decade vs. Others’

  6. Share of Rich Country GDP Falls

  7. Japan Share of World Exports Down

  8. Slow Income = Slow Spending

  9. ZIRP Erodes Household Income

  10. Excess Capacity = Weak Investment

  11. Investment Still Below 1991 Peak

  12. II. The Causes

  13. Lost GDP: ¾ Supply, ¼ Demand The horizontal zero line shows where GDP would be if 1975-90 growth had continued. Grey area shows lost GDP due to demand shortfall. Black area shows lost GDP due to slowdown in potential growth—not counting slowdown in labor force growth which is shown in diagonal stripes.

  14. Competition in Efficient Sectors...

  15. ...But Not in Inefficient

  16. Low Trade Means Low Productivity

  17. More Imports Leads to Higher Productivity Growh

  18. Low Consumption From Low Income

  19. Chronic Excess Business Savings

  20. III. Banking Crisis

  21. NPLs Keep Rising . . .

  22. ... As Banks Slacken on Disposal

  23. Non-Performing Borrowers

  24. Govt Guarantee of Private Loans

  25. IV. Fiscal and Monetary

  26. Lost Taxes At Heart of Deficit

  27. ZIRP Enables Govt to Fund Debt

  28. Koizumi Budget: Asking For Trouble Since stimulus operates with a lag, the chart shows how changes in GDP follow from changes in the deficit one year earlier. 1998 shows GDP growth in 1998 and budget change in 1997.

  29. BOJ Printing Money; Economy Not Responding

  30. Deflation Symptom of Weak Demand

  31. V. Weak Yen No Panacea

  32. Shrinking Share of Global Surplus

  33. Shrinking Share of U.S. Deficit

  34. Yen and Stocks Move in Tandem

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