I too read this and I thought all those years of NYT bashing of Japan--that Japan did not support its consumers, that credit was tight, etc. etc. Now to see this praise for Japan for its austerity measures seems rather illiberal (NYT style).
As for accuracy I think that's pretty much the picture. In any case Japan has high savings ratio. It's that damned export success that created the financial bubble combined with the "irrational exuberance" that got it into trouble. The Japan postal system does sit on 2 trillion dollars (that's right) on personal savings. Anthony On Sat, Dec 20, 2008 at 7:41 AM, Jim Devine <[email protected]> wrote: > [is this accurate??] > > The New York Times / December 20, 2008 News Analysis > > Japan Offers a Possible Road Map for U.S. Economy > By MARTIN FACKLER > > TOKYO — When the Federal Reserve cut its benchmark rate to virtually > zero earlier this week, what was a historic move in Washington seemed > old hat here in Tokyo. > > The Bank of Japan kept rates near zero for most of the last decade in > an effort to end a long economic stagnation, and raised them only two > years ago. Many economists say they believe that the zero > interest-rate policy finally worked in Japan after regulators took > aggressive steps that succeeded in restoring faith in Japan's > financial system and Tokyo's ability to oversee it. > > Now, with the Fed and President-elect Barack Obama turning to the same > sorts of unconventional policy tools to battle the worst global > economic crisis since the Depression, economists and bankers say they > hope that Japan's lessons are not lost on Washington. They say the > United States needs to take the same kinds of confidence-building > steps, and much more quickly than Japan did. > > "Japan had years of trial and error to gets its response right, but > the United States doesn't have that kind of time because markets are > changing so fast," said Akio Makabe, an economics professor at Shinshu > University. "The Fed has to move, and has to move fast, to restore > confidence." ... > > The Bank of Japan first lowered interest rates to zero in 1999 for a > year and then again in 2001 for five years. The Japanese central bank > was trying to contain a domestic financial crisis not unlike the one > now crippling global markets, in which collapsing real estate and > share prices caused the bankruptcy of large financial companies, like > Yamaichi Securities in 1997. > > The central bank's hope was that by lowering borrowing costs to > virtually nil, it could encourage commercial banks to lend more money > to businesses and consumers, rekindling demand. > > Economists and former Bank of Japan officials say the biggest lesson > they learned was that cutting rates alone has almost no effect when > the financial system has fallen into a crisis as deep as the one Japan > faced in the 1990s. > > Japanese banks simply refused to lend in an environment where > borrowers could suddenly go bankrupt, saddling lenders with huge, > unforeseen losses. The Bank of Japan tried even more extreme measures, > like using its powers to create money to essentially stuff cash into > the nation's commercial banks in hopes they would start lending again. > > Exasperated central bankers found that commercial banks just let the > money pile up instead of lending it out. > > Economists say the United States faces a similar situation, after the > sudden collapse in September of Lehman Brothers created fears of > additional failures. Economists also fault Washington for its > inconsistency in dealing with the financial crisis, leaving the > impression that it does not have a clear strategy for dealing with > ailing lenders. > > In Japan's case, economists and former bankers say, credit began to > flow freely again only after 2003 [just in time for a new bubble?], > when regulators adopted a tough new policy of auditing banks and > forcing weaker ones to raise new capital or accept a government > takeover. Economists said the audits finally removed paralysis in > credit markets by convincing bankers and investors that sudden > failures were no longer a risk, and that the true extent of problems > at banks and other companies was finally being revealed. > > Economists say Washington needs to do something similar to make banks > and financial companies more transparent, and reassure investors that > there were no more collapses like that of Lehman Brothers on the > horizon. > > "The United States needs to do it like Takenaka did," said Anil > Kashyap, a professor of business at the University of Chicago, > referring to Heizo Takenaka, the former banking minister who started > the 2003 audits. "We need someone to come in and give a good > housekeeping seal to banks." > > Economists and former central bankers said another lesson from Japan's > experience was the importance of consistency. This became apparent in > 2000, they said, during one of the bank's more embarrassing episodes, > when it raised interest rates, and lowered them back to zero a year > later when the economy faltered. > > Former Bank of Japan officials said they learned that bankers and > investors would lend in difficult times only if they believed that > rates would stay low for a long period, ensuring them adequate > profits. By raising the possibility of future interest rate increases, > the Bank of Japan dampened enthusiasm for lending, say bankers and > economists. > > "We learned that zero rates work by building expectations," said Rei > Masunaga, an economist and former director general at the Bank of > Japan. "Zero interest rates take time to be effective." > > Copyright 2008 The New York Times Company > > [Wouldn't persistently low interest rates encourage people to expect > that _eventually_ they'll rise, causing falling bond prices and > capital losses for bond-holders, so that speculators will cling to > money and short-term paper?? That's Keynes' original story of the > liquidity trap, as I understand it.] > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own > way and let people talk.) -- Karl, paraphrasing Dante. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Anthony P. D'Costa Professor of Indian Studies Asia Research Centre Copenhagen Business School Porcelænshaven 24, 3 DK-2000 Frederiksberg, Denmark Email:[email protected] Ph: +45 3815 2572 Fax: +45 3815 2500 PhD in INDIAN STUDIES WEBSITE http://frontpage.cbs.dk/jobs/stil.pl?func=details&id=1147 http://uk.cbs.dk/arc www.cbs.dk/india xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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