1
In 1990, Japan was on track to become the #1 economy
n
Average Real Growth was exceptionally highin postwar period
n
1950-1970: 8.4% annual per-capita
n
1970-1990: 3.4% annual per-capita (4.1% unadjusted)
n
Large Trade Surpluses, especially with U.S.
n
Offset by high rates of investment in U.S. and Asia.
n
Value of Yen rising
n
360 Yen per Dollar before 1971, 300 in 1973, 130 in 1990 –an average appreciation rate of 4% per year.
n
Per-capita GDP higher than U.S.
n
Adjusting for Purchasing Power Parity, 81% of U.S. level(30% of U.S. level in 1870, 20% in 1929 and 1950)
Then the Bubble Burst
n
Prices of Stocks fell dramatically:
n
After rising from 12,000 in 1985 to 39,000in 1989, stocks fell to 16,000 by 1992.
n
Real Estate and other Assets similarlyaffected.
n
Bubbles happen, and bubbles burst, butin Japan the decline never ended.
n
Currently, the Nikkei is around 12,000.
2
Nikkei 225 Index02,0004,0006,0008,00010,00012,00014,000
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Monthly Data
U . S . I n d i c e s
05,00010,00015,00020,00025,00030,00035,00040,00045,000
N i k k e i 2 2 5 I n d e x
Dow Jones Industrial AverageNasdaq IndexNikkei 225
After 1991, Japan alsostopped growing
n
Between 1990 and 2004, average realper-capita growth averaged around1.0%.
n
Four identifiable recessions.
n
After a year or so of hope, another onemay be beginning.
3
Real Japanese GDP
020,00040,00060,00080,000100,000120,000140,000160,0001969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Quarterly Data
R e a l Q u a r t e r l y G D P ( 1 0 0 m i l l i o n Y e n )
-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%
A n n u a l G r o w t h R a t e
What happened to Japan?
Why the world’s second largesteconomy slowed down
Professor Elliott ParkerDepartment of EconomicsUniversity of Nevada, Reno April 14, 2005
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