Lessons from the Japanese After the Bubble Period

Lessons from Japanese after the bubble period

Short history of Japanese after bubble age • 1990; Burst of equity bubble (peak level of Nikkei:38915 ) • 1991; Peak out of real estate ( declined to one fifth of peak level ) • 1992; Signal of financial crisis ( Small banks ) • 1995; Signal of financial crisis ( Jusen crisis ) • 1997; Moment of truth ( Yamaichi crisis )

CRIC cycle in 1990s • Crisis; Stock market falls due to financial uncertainty • Response; Fiscal stimulus and monetary easing, but kick the can about the NPL • Improvement; Economy recovers, the NPL problem remains • Complacency; False dawn, stock market falls again and new crisis comes

Turnaround by Kinzumi & Takenaka • Strict examination and enough public money injection to Bnaks • Resona case ( nationalization and 2 trillion yen recapitalization in 2003 ) • Recovery of equity market confidence helped by the great FX intervention ( 35 trillion yen ) • Bottom out of real estate price and peak out of the volume of NPL

The homework still remaining • Cash lover tendency; Banks and cooperates who faced crisis do not want to take a risk.

• Fiscal deficit; Private sector saves the money, public sector uses it.

• Deflationary equilibrium; Then deflationary mind became fixed.

• Japanization in Europe? If not to say so about the US.