Saturday, April 16, 2011

The Myth of Japan's Lost Decades

This is a myth that keeps on giving. It seems helpful in the mainstream to maintain this myth. Please see the attached for a nice exposition, as well as links to further charts and analysis on the subject:

A couple of takeaways:

1) The myth arises from a view of Japan's flat GDP.

2) GDP is a poor statistic for measuring growth in an economy. For example, it relies heavily on the use of a deflator. There is not (likely) a more manipulated statistic (and impossible to measure in any case) in economics than that measuring price inflation.

Japan has not inflated its currency. Japan has not experienced decades of deflation. While the banks have been propped up (with the expected negative impacts), Japan has not otherwise been "lost." The linked article captures this quite well. I certainly cannot further elaborate.

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