Monday, February 28, 2011

Japan's GDP Growth Since 1990 is About the Same As Europe, But Lost Decades Only Apply for Japan?

Here's an updated chart to follow up on this post about the "Media Myth of Japan's Lost Decades." The chart above starts in 1990, instead of 1980 like in the previous post, and shows real GDP per capita for the U.S., Germany, Japan and Italy, with each country's GDP per capita converted to an index equal to a starting value of 100 in 1990.  We can see that Japan's real output per person grew slightly less per year (average of 0.91%) than Germany's (1.12%), and slightly more than Italy's (0.76%), and each of those country's real GDP per capita grew less than the U.S. at 1.41% per year.  And yet even with economic growth in Germany and Italy and many other European countries that is comparable to Japan's growth, we never hear about the "lost decades" in Germany or Italy or the U.K.  


At 2/28/2011 6:40 PM, Blogger Benjamin Cole said...

The author (Finnegan) notes the yen is up 65 percent against the dollar in this period. Exchange rates can play havoc with "real output" caculations. Had the yen not appreciated, you would see huge declines in "real output" as measured in dollars.

Also, if things are so great in Japan, why has the Nikkei Dow lost 75 percent of its value in the last 20 years, and property markets roughly the same? Why are wages down over the last 20 years?

Even the inefficient and socialized nations of Europe are passing Japan by.

Japan has been suffocated by the monetary noose strung up by the Bank of Japan. They are yet deflating as we speak, and bond traders expect another eight years of deflation, minimum.

Meanwhile, South Korea and China has been roaring ahead. Japan is becoming a backwater nation.

At 2/28/2011 6:53 PM, Blogger jeremy h. said...

Fair enough. But part of the narrative is about the reversal of trend. Japan had extremely high growth rates from 1950-1990, and much fear was expressed that they were going to "beat" the US (insert China today).

And for Germany and Italy, there is really only one lost decade, 2000-2010. Both had 1.5% growth in the 90s, not stellar and not US levels, but not much worse than they had in previous decades.

And I'll emphasize again that you need to use PPP figures. It makes a difference, sometimes a big difference.

At 2/28/2011 7:51 PM, Blogger Bruce Hall said...

Lost decade: 1991-2000.

At 2/28/2011 7:54 PM, Blogger Buddy R Pacifico said...

2000 -> 2009

U.S. Lost Decade?

Check out this chart that measures the U.S. for the last seven decades: WA PO Chart.

At 2/28/2011 8:48 PM, Blogger Methinks said...

Well....Europe is just a lost continent with few exceptions, so I guess "lost" goes without saying when it comes to Europe :)

At 2/28/2011 10:53 PM, Blogger PeakTrader said...

U.S. Real Per Capita GDP in Business Cycles 1973-82 (long-wave bust period), 1982-90 (expansion), 1991-00 (expansion), 2001-2007 (expansion, and 2001 recession so mild it wasn't a recession based on annual real per capita GDP).

1973 $23,200
1982 $25,280

1982 $25,280
1990 $32,112

1991 $31,614
2000 $39,750

2001 $39,773
2007 $43,482

At 2/28/2011 10:56 PM, Blogger PeakTrader said...

The U.S. created 17.6 million jobs between 1993-98, and created only 3.7 million jobs between 2001-06. However, U.S. real GDP growth was only slightly higher from 1993-98 than from 2001-06. So, the U.S. became much more productive in the 2000s, i.e. using fewer inputs to produce more output.

At 2/28/2011 11:01 PM, Blogger PeakTrader said...

Over a five-year period in the 2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3% annually, in spite of 6% annual current account deficits (which subtract from GDP).

The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, and in a structural bear market that began in 2000.

At 2/28/2011 11:28 PM, Blogger Buddy R Pacifico said...

Peak Trader, If we are discussing a decade, rather then picking an interval within a decade (2001-2006), then the Decade Real U.S. GDP figure shrinks from 3% to 1.54% for 2000 to 2009 (Source).

Further, as my comment link above shows, household net worth fell 4% in the 2000s Lost Decade.

At 2/28/2011 11:37 PM, Blogger PeakTrader said...

Buddy, a U.S. Lost Decade in the 2000s is an illusion.

A Lost Decade is possible starting after the economy peaked in Q4 2007.

U.S. net wealth:

US household net wealth rises
But remains below the record level set in Q3 2007.
15 June 2010

At the end of Q1 2010, the value of US household assets amounted to $68.53 trillion.

At the end of Q1 2010, the level of US total household debt was $13.97 trillion.

US net wealth now represents a very respectable 491% of household disposable income. The current ratio is actually exactly in-line with the long-term ratio, which dates back to 1952, although there have been times when the ratio has risen over 600%.

Overall the US consumer remains extremely wealthy by historical and international standards; despite the high level of debt.

At 3/01/2011 4:33 AM, Blogger juandos said...

Hey , where did you find the stats in your "Buddy, a U.S. Lost Decade in the 2000s is an illusion.

A Lost Decade is possible starting after the economy peaked in Q4 2007
" comment?


At 3/01/2011 6:52 AM, Blogger geoih said...

Now factor out of your GDP numbers the government spending, which is either money borrowed or confiscated from the real producers and see what the "growth" is.

Just more manipulated aggregates that mean little or nothing. Tools for the politicians and bureaucrats to stay in power.

At 3/01/2011 9:51 AM, Blogger morganovich said...

geo has an excellent point.

in 2000, japans public debt was 70% of GDP. it now exceeds 190%.

this means that it went from .7 X 4.7tn = 3.29tn to 1.9 x 5.1tn = 9.69tn, a gain of $6.4tn.

GDP over that period has averaged about 4.6tn. thus, we see overall economic activity 11 X 4.6 = 50.6tn.

from this we can calculate that 12.6% of all economic activity in the last decade has been driven by government borrowing.

take that out and the magnitude of this collapse becomes apparent.

At 3/01/2011 10:03 AM, Blogger PeakTrader said...

Juandos, there are many reliable data sources, and a Lost Decade in the 2000s ignores many factors or the real economy (up to Dec 2007 or Sep 2008, when Lehman failed).

The U.S. had a spectacular bull market from 1982-00, and the current bear market will end around 2017. So, a Lost Decade is possible from 2007-17, given recent economic policies.


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