I've often wondered what the hell Japanese Economists think about their situation. I've been tearing out my hair at our Fed, and this has only been going on for about 16 months. Japan's needlessly been stuck in a liquidity trap for 16 years, for no better reason than their central bankers are completely incompetent. So what do they think? Well, once at an economics conference I met a guy who was both Japanese and a Monetary Economist, and his answer was that he hadn't really thought about it.
Here's a couple blog posts I came across. The first seems to be saying that if Japan prints too much money, then they'll have to deal with too much inflation. Well, yes, but then they can just raise interest rates. So that's much less of a problem than Japan's had the past 20 years. Another post on the blog talks about how, even with inflation, Japanese might still worry about the problem with aging society/saving for the future and structural problems, but the fact is, before deflation, Japan was converging on the living standards of the US and Western Europe rapidly, and since they've been stuck at around 2/3rds (perhaps higher gdp per capita than some of europe, but by working waaay more hours)...
The second post translates a few of my posts, which is obviously quite sensible.
Unfortunately, you if you can't read Japanese you might have trouble with those two posts...
I like the way they write "Thorstein Veblen" in japanese: soosutein bueburin. Nice ring to it.
Termites in Your Cabinet
10 hours ago
If you consider population growth the Japanese situation is not what it seems to be at the aggregate level. see here
ReplyDeleteNope. I'm going to have to reject this line of argument. You wrote.
ReplyDeleteWhereas the number of potential workers in the U.S increased by 13% during Japans "lost decade" (1991-2000), and by 3% in for example France, the Japanese potential workforce actually shrank during these years. Adjusting for this, the growth in Japan was 9.8%, compared to 16.9% in Germany, 17.3% in France, 16.3% in Italy and 23.2% in the United States. The U.S grew by twice, not four times of Japan (remember that these were the best years of the U.S and the worst years of Japan).
Japan's comparative performance still looks bad here, although, as you correctly point out, it doesn't look as bad as it does if you look at total GDP. But what we really want to look at is convergence and hours worked, the difference in difference. If you look at the period 1970-1990, japan grew much, much faster than the US and was converging rapidly, since then, the growth rates are nearly reversed. Especially once you factor in hours work, it's clear japan never quite converged. This is due solely to the fact that the real rate of interest has been too high.
Secondly, for the calculations you do at the bottom, you should start the post 1990 time period at 1993 since Japan's three fastest years of growth during that time were 1990, 1991, and 1992... Since then, they've averaged no more than 1% growth per year. http://en.wikipedia.org/wiki/File:Real_GDP_growth_rate_in_Japan_(1956-2008).png
ReplyDeleteAnother thing you should control for is mean age of the workforce. 40 year olds are much more productive than 18 year olds. Controlling for this would cut against Japan's performance since 1993 since their workforce has aged more and the US has had more 18 year olds enter... This implies it might, after all, be fine to look at GDP per capita metric, where Japan compares terribly, especially looking at the difference-in-difference metric.
ReplyDeleteYou might check out Richard Koo's presentation at a Conference at Kings College last Jan--it's on Japan's lost decade and parallels with the current US situation:
ReplyDeletehttp://inet.civicactions.net/sites/default/files/media_files/players/INETVideoPlayerAlone.swf?startingVideo=6k0_a1JS5hU
Many of the presentations at the conference are worth a look-see--the url is
http://ineteconomics.org/initiatives/conferences/kings-college/proceedings
Walter -- Thanks for the links... I'll check them out and comment in the next couple days.
ReplyDeleteThank you for referring to my blog. The post you linked gathered some popularity, as you can see from the attached hatena-stars and hatena-bookmarks. I always enjoy your writing, and would like to continue to introduce them to the Japanese.
ReplyDeleteBTW, I once posted comment in this blog:
http://firelarrysummersnow.blogspot.com/2009/07/excess-reserves.html
Great bblog I enjoyed reading
ReplyDelete