All Eyes on Japan

But Japan is a different story. It is a large, advanced economy, which has been grinding through the results of its own banking and financial crisis. Its story has been more one of year-after-year of stagnant growth than one of outright depression. It has control over its currency, and its citizens’ demand for government bonds is deep enough that it simultaneously has the highest debt to GDP ratio in the world and the lowest interest rates (which is quite a trick).

In effect, Japan is a cautionary tale of what the United States, Britain, and continental Europe could become if the major Western powers can’t jolt ourselves out of a long period of economic stagnation.

Neil Irwin says Japan is the most interesting story in global economics right now, because after two decades of stagnant growth and persistent deflation, it is aggressively using fiscal stimulus and doing “whatever it takes” to get inflation up (Paul Krugman has been on this before). We will watch with interest, with the underlying understanding that Japan has a different story than our own.

Photo: Marc Veraat

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