Japan's long ordeal

[Nilakantha Agni]

Japan's long ordeal

What happens when politics tries with all his might to maintain a boom whose time has come to an end, shows Japan. Since 1990, Japan is in a lingering depression that arose from the bursting of a credit bubble.
Japan experienced unparalleled 1953-1989 an economic boom. Japanese products, cars, consumer electronics and memory chips, seemed to flood the world market. The Japanese stock market from a high to the next. The country experienced a boom in property prices. End of the 80s it was said that the site is at the Imperial Palace in Tokyo was worth more than all Southern California in the United States. Eight of the ten largest banks in the world were based in Japan. Japanese bought Rockefeller Center, the Columbis Studios in Hollywood and auctioned at Christie's actions and Sotheby's with record amounts paintings by Renoir, van Gogh, Chagall and Monet.
Since early 1990, Japan is suffering from a paralysis of its economy that responds to any action by the policy. Several times, the country slipped into recession. Despite massive new borrowing of the state after 1994 was added to the problem of deflation. Only after 14 years of deflation in 2004, from the first signs of improvement. This is the land still second largest industrial nation in the world. Japan still has the highest foreign exchange reserves and trade surpluses in the world. The living standard is higher than that in many areas in the United States. All of this helped but nothing: Japan could not overcome the paralysis of its economy today.
After the Japanese stock market peaked in December 1989 at 38 915 points at its height, it fell to 7831 points in April 2003.Das is a value loss of 80% or four fifths. Moreover, this loss in value was painfully slow and gradual. In Germany, rich three years of falling share prices to drive investors scratching of the stock market. In Japan were really after thirteen years of trembling and hoping only the most persistent and most indifferent investors involved. The real economic consequences of Börsenchrash followed with several years of delay. From 1993, Japan was in a depression. Beginning in 1994, it also suffered periodically from the deflation. We use the official inflation rate was about 1% overstated, so the deflation even higher than they had been shown in the statistics. Overall, the Japanese national wealth 1990-2002 declined by 23%. Unemployment rose to more than double, and in a country where the lifelong Beschäfftigung is treated as the highest good. If someone had predicted this development in 1989, he had not been, at best, seriously.
End of the 80s was in fact still all been very different. The Japanese announced their success with the peculiarities of their character and the Nippon. Diligence, integration into the group, the common good and loyalty are highly regarded virtues.
The yen was undervalued for a long time clearly what make easy exports strong. On domestic markets, Japanese companies had signed a truce so they could devote his entire energy to the world market. Often, the prices of the goods sold at home and goods for the export prices, which prompted particularly America to speak of unfair trade practices. Japanese companies had to take little consideration to the capital markets. The fuel-efficient Japanese contributed their money to financial institutions and this
Again, low-interest loan to companies. Fear that the banks were not paid appropriately for their credit risk, have had no one in doubt because it would not allow the Japanese government to let go of a bank into insolvency. The risk was the taxpayers. Reasonable returns demanded the Japanese savers therefore not last long. Japanese entrepreneurs were thus freed from the pressure of capital markets and could devote all of the long-term business strategy. In principle, the explanations for the rise of Japanese sound logical. Why, then, the country could fall so deeply into the crisis?
The Japanese central bank cut interest rates radically. From 1995 to 2005 the effective interest rate was nearly 0 percent. The state invested heavily in infrastructure programs to stimulate demand. But those measures have had no effect. More than 40 years of growth were the Japanese believe that it would have to go on forever. After all, the country and its inhabitants were indeed witnessed something special, this is progress. In the second half of the 80 years the country was already in a bubble. further increased the already expensive even without equity market is the 80 years ger, who was Nippon Telegraph and Telephone NTT 376 billion U.S. dollars worth-more than all its publicly listed companies in Germany together.
Already in 1986 declined Unternehmensgewine, economic growth halved. Subsequently, the government reduced interest rates. In four steps, the Japanese central bank reduced the interest rate to 4%. The intention was: First, companies should be made easier to take in more money and invest. Second, by saving for individuals would be unattractive. So you would spend the money. Theoretically. In logical sequence that would lead to a revival of the economy. The company is indebted to actually make exorbitant on new investments in large scale. But, the savings rate of Japanese individuals took up their efforts. 1985-1991 from 32.2% to 34.5%! This was the banks and corporations even more capital. In 1987, also with the privatization of NTT initial spark for the Japanese financial markets. In 1986 the yen had become noticeably more expensive. In late 1987 the Bank of Japan lowered interest rates again to 2.5% now. Healthy growth is not supported now. The Japanese firms put their extra cash now increasingly speculative investments. The risk was apparently low-economic base was added and capital was cheap and in abundance.
While the bulk of the Japanese continue to diligently saved, misled the cheap money is precisely the reckless members of the society to absorb debt. The consumer debt rose to 130% of the gross national product. The number of credit cards rose by 200%. The bank debt rose to around 724 billion dollars and consumer loans by 70%. The debt of the Japanese company was the top of the bubble at 225% of the gross domestic product. Besides the stock prices exploded the Immobilienpreise.1987 the value of all properties increased by an amount n Japan, which became the national product of Japan in the same year übertraf.1989 the bubble even the Japanese banks scary. The base rates were increased in two increments of 2.5% to 3.75%.
In Jahr1990 first no one wanted to believe that the bubble burst war.Die corporate profits in 1991 and 1992 dropped significantly. Only in 1992 the country slid into recession. At that time the Japanese central bank had already begun long with its policy of interest rate cut steps, which she continued strengthening. From July 1991 to April 1995, the Bank of Japan lowered the discount rate from 6% to 0.75% down. Inflation einberechnet, was the interest rate u which Japanese banks were refinanced in 1995, that is effectively 0%. And since he has remained until today.
All the madness was only gradually revealed. From 1993 to 1999, the number of bad loans from the boom years that had to be written off by an annual 2.5% of GDP .. depressing to 8.2% The Japanese economy had to cope with an annual asset-destruction at this level. To date, supports the country's banking sector and financial institutions hold many alive who were actually insolvent. Also, some companies are only zombies that are kept with other cheap credit in a state between bankruptcy and survival. Japan not only left it at super low interest rates and the support of unhealthy banks to the depression of the 90's defeat. A debt-financed economic stimulus program replaced the other. The expenditure on public infrastructure grew rapidly. Japan has virtually cemented. Of 113 rivers have been diverted 110 or jammed. Mountains were removed to obtain material for land reclamation, roads were built meaningless. From a surplus of 2.1% in 1990 was such a huge budget deficit of7, 9% in 2002. 70% of GDP 10im 1991 increased the debt of public budgets to 150% in 2006.
But even that did not work. Although the Japanese economy grew a bit every now and then, but that was not enough to utilize the jobs created by the natural productivity growth capacity. The result is more unemployment, less consumption, more problems.

The crisis in the U.S., there are many parallels. After the collapse of the crisis, both central banks lowered interest rates dramatically. The U.S. Federal Reserve for a total of 5.5% after 2001, the Bank of Japan by 5.25%. Greenspan turned in the money supply in the United States within two years, while in Japan it lasted four years. The hyper-expansionary monetary policy of the U.S. central bank chiefs also meant that the real estate boom lasted longer.


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