The conversation turns to the Japanese crisis of the 1990s. In retrospect, I suggest, the Japanese seem to have managed the aftermath of their crisis quite well.
He agrees. “What we thought was that Japan was a cautionary tale. It has turned into Japan as almost a role model. They never had as big a slump as we have had. They managed to have growing per capita income through most of what we call their ‘lost decade’. My running joke is that the group of us who were worried about Japan a dozen years ago ought to go to Tokyo and apologise to the emperor. We’ve done worse than they ever did. When people ask: might we become Japan? I say: I wish we could become Japan.”
Read the whole story by Martin Wolf via FT
Krugman Update: Here’s the employment-population ratio of men 15-64 in Japan and the United States since 1991, when Japan’s woes are often considered to have begun. Why men as opposed to both sexes, and why the age limitation? Basically, to abstract from social change and demography — Japan has lagged the US in terms of women in paid labor, and also of course has a rapidly aging population. I don’t mean to suggest that only prime-age men matter; this is just a relatively clean indicator. And here’s what it looks like:
Source: OECD i-Library
For all its woes, Japan has never experienced the kind of employment collapse we’ve suffered. That’s the sense in which we’re doing far worse than the Japanese ever did.
So as I said, in a way Japan is no longer a cautionary tale; it’s still a lousy story, but compared to us it almost looks like a role model.