japan’s lost decade

Robin Harding

A Japanese contact, who shall remain nameless, recently urged me to read the questionnaire that US academic Adam Posen submitted to the UK’s Treasury Select Committee last July before he became a member of the Bank of England’s Monetary Policy Committee.

Mr Posen is an expert on Japan’s lost decade who wrote two books on it in 1998 and 2000. His answer on Japan is both an excellent summary of the lessons – such as the limitations of quantitative easing – and revealing on how Japan’s economic situation hasn’t developed quite the way that anybody expected.

It is worth reading in full – question 10 on page 8 – but I’ve posted a few of the most interesting paragraphs below. Read more

Robin Harding

Following on from yesterday’s post about the chances of a Japanese sovereign debt crisis (possibly ending in hyperinflation) – given that the national debt is almost all owed domestically – can anyone think of a comparable historical episode?

We’re looking for a case where sustained fiscal deficits led to a bond market/currency crisis – but where almost all of the national debt was held by the country’s own citizens, the country was a net creditor to the rest of the world with a positive trade balance, and the national currency had no hard currency link (to gold or the dollar). Read more