Could Japan’s Economic Malaise Strike Here in US?

If you wonder what haunts Federal Reserve Chairman Ben Bernanke’s dreams, it’s Japan.

Japan has suffered more than two decades of subpar economic growth, made all the more miserable by falling consumer prices, a stagnant real estate market and a moribund stock market. The worry: that the U.S. economy devolves into something like Japan’s.

Some of the similarities between Japan’s economic woes and the U.S.’ are striking. Both countries have aging populations. Both have ultra-low interest rates, which don’t seem to be having much effect in stimulating the economy. And both countries are struggling with high debt load

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Six lessons Japan can teach the West

If you are living in the U.S. or Western Europe and feeling pretty bad about the miserable state of the recovery, political paralysis, and growing unease about your country’s future, remember things could be worse. You could be in Japan.

Japan has been experiencing those same woes for the past 20 years. And there is no end in sight. Prime Minister Naoto Kan is likely to step down by the end of the month. An announcement could come as early as Friday. His replacement will be the third PM since the Democratic Party of Japan won its historic electoral victory two years ago. Kan leaves behind an economy that has contracted for three consecutive quarters. Yes, part of the reason is the devastating earthquake and tsunami that slammed into Japan in March. But a bigger reason is the continued failure of Japan’s political leaders to tackle the economy’s deepest problems. Kan had a few good ideas – reforming the distorted agricultural sector, for example, or connecting even more to a thriving Asia – but in the end he achieved little. Japanese politics just doesn’t seem to allow for any new ideas ever becoming actual policy.

As the U.S. and Europe find themselves in a protracted downturn of their own, while their political leadership bickers, dawdles and vacations, more and more voices have started asking if the West is entering an endless, Japanese-style economic funk.

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