Japan: before and after March 11

Notes internacionals CIDOB, núm. 41

Japan is a very special case. The second-largest economy in the world until early this year has undergone a successive series of crises such as no other economy in the western mode has experienced. Table 1 shows the evolution of the Japanese GDP in real terms. As has been observed, since the bubble burst in 1990, there have been three periods of crisis, the first from 1991 to 1994, the second from mid-1997 to the end of 1998, and the third in 2001, each with subsequent periods of recovery. The first crisis came about with the bursting of the economic bubble when the interest rate increased, with a strong loss in value of real estate assets and of stock market values. This crisis lasted three years and was the longest of the period. The second crisis coincided with the increase in the general consumption tax from 3 to 5%, which generated an almost immediate fall in consumer demand, weakening the economy. In this period, moreover, the financial crisis became more acute, leading to the greatest banking and credit crisis and coinciding as well with the financial crises of Southeast Asia and the temporary loss of certain Asian markets. The third crisis arose in 2001 in the midst of the United States recession and the telecommunications crisis. In the face of this situation, the actions carried out by the Japanese government centered on the one hand on the deregulation of the economy and broadening of access to the Japanese market, on contingency monetary policy measures, such as a progressive decrease in the interest rate until it reached 0.5 in 1996, and starting up an ambitious fiscal stimulus program. Despite such measures the real growth of the economy has remained under 2% throughout the greater part of the nineties, unemployment stands at over 5% since 2001, and prices have not ceased to fall since 1999. The problems of the financial system have made banks less willing to give loans, and as a result credit has shrunk.

During the 2002-2007 period, Japan has experienced stable and continual economic growth, the contribution of exports, in particular to China, the gross fixed capital formation of export companies, which have been essential to the growth of the real GDP and have allowed the country to overcome the grave international financial crisis in 2010, while private consumption and the investment of Asian enterprises in the domestic market have shown much more modest behavior. Despite these favorable perspectives in 2010 and part of 2011, deflation has refused to disappear, the unemployment index has remained high in comparison with pre-crisis levels, and the indebtedness of the public sector continues to be one of the highest in the developed world.

As mentioned, one of Japan’s current economic problems is the high public sector borrowing, the consequence of policies carried out during the crisis. On the one hand, the current deficit has experienced high growth, reaching close to 10% of the GDP, while the growth of public debt accumulated since the early 90’s has been spectacular, rising from 1992 levels of nearly 75% of the GDP to 220% in 2010.

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