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The Age of Balance Sheet Recessions: What Post-2008 U.S., Europe and China Can Learn from Japan 1990-2005

Richard C. Koo
Chief Economist
Nomura Research Institute
Tokyo
March 2009

1
Exhibit 1. US Economy Is Deteriorating Rapidly
70
72
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82
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86
98
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00
01
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3.5 4.0 4.5

5.0 5.5 6.0 6.5 7.0

7.5 8.0 8.5

Capacity Utilization
(left Scale)
(%, Seasonally adjusted, inverted)
Unemployment Rate
(right scale)
Sources: US Department of Labor, FRB
(%, Seasonally adjusted)
2
Exhibit 2. EU Economic Sentiments Are Worsening
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1202000
2001
2002
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2005
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2008
2009
(Seasonally adjusted)
Source: Ifo Business Survey, European Commission
Ifo Business Climate
Euro Area Economic Sentiment
of 00

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Giovanni Sestili

Great presentation even though rather difficult to understand if not familiar with Koo's concept of Balance Sheet Recessions. I strongly recommend his book "The Holy Grail of Macroeconomics", where he thoroughly describes the Japanese recession of the so called "Lost Decade" (a term that Koo disagrees with), and where he illustrates why Balance Sheet Recessions are a different animal and why the

reply08 / 11 / 2010
samgreenlaw

Slide # 13 shows the $1.5-trillion Savings-to-Investment shortfall from tax cuts & ZIRP. Bingo.

reply02 / 01 / 2010
fangteng

Great analysis on Japan's recession...and can be easily related to the current global recession...

reply11 / 13 / 2009
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