Identify the lessons learned from "Japan's lost decade" and their relevance to the US economic situation in 2008-2009.

Asked on by nykieab

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The major lesson from Japan seems to be that government policies, either fiscal or monetary, cannot fix an economy if it has fundamental flaws.  After the bursting of their real estate bubble, Japan's government engaged in deficit spending and pursued a loose monetary policy.  Both of these are actions that are supposed to stimulate an economy.  However, these actions did not stimulate the economy enough to create sustained growth.  This is presumably because there were structural flaws in their economy.  With Japan, it was an inability to find a new model for the economy once the export-led model broke.  For the US, it is the need to move away from a consumption-driven economy given that so much of that consumption was enabled by unsustainable amounts of borrowing.


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