Marshall Auerback at Credit Writedowns has a lengthy but good overview of Japan’s lost decade (1991-2000) and how it may have lessons for us in reference to the current global crash. However there are large differences between Japan of the 1990s and the US of today specifically with respect to the amount of savings that Japan had/has vs. the fact that US has never saved much since the Korean War.
By contrast, everything that Japan did in terms of banking recapitalisation and quantitative monetary easing has been effected by the Bernanke Fed within a year of the credit crisis enveloping the US economy. And President-elect Obama has already promised major fiscal stimulus early next year. The one aspect of the Japan analogy which does suggest ominous problems for the US is the latter’s exceptionally high debt to GDP ratio of 350 per cent which contrasts negatively with Japan’s huge accumulated savings surplus at the time their bubble burst. Of course, one could easily turn that argument around and suggest that the savings surplus gave Japan’s monetary and financial authorities a significant margin of error in policy making, a margin which they comfortably exceeded through a combination of political inertia and economic incompetence.