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When the world turns Japanese

15 5 0

Not a household name in Japan, but Carmen Reinhart may explain better than anyone why wages fell the most in 25 months and bonuses got slashed in July.

The Harvard professor and his co-author, Kenneth Rogoff, ruffled many a feather in 2009 with “This Time Is Different.” Those four words, the most dangerous in economics, breed hubris and manias that invariably end badly, lethal delusions like the tech-stock boom of the late 1990s, the idea home prices couldn’t fall in 2007 and today’s faith that China’s crushing debt and runaway pollution really don’t matter.

Thirty years ago, Japan, too, was thought to be confounding centuries of theory as living standards and assets went up, up — and up. By the early 1990s, the narrative had swung to Japan as yet another cautionary tale of hysteria run amok. Yet Reinhard’s take on Japan’s stagnant-wage present is unearthing fresh lessons both for Prime Minister Shinzo Abe’s government and developed-economy peers struggling to hasten growth.

The bottom line, she argues, is that “recovery isn’t the same as resolution.” An obvious thought, perhaps. But nearly five years into Abenomics, there’s a clear pattern of the prime minister’s team and investors agreeing that faster gross domestic product is enough. Time and time again since December 2012, any........

© The Japan Times