LESSONS FROM JAPAN

We are now four to five years into this financial crisis. The effects are different in different countries, but one thing is the same; according to politicians, the recovery is "just around the corner". The corner may be one year, two years, five years perhaps; but definitely within the foreseeable future.

I am not so sure. My reason for scepticism, if not worry, is Japan. Japan had its own property and financial bubbles during the late 1980's. They were reflected in golf club memberships changing hands for millions of dollars, and valuations which said that property in Tokyo was worth more than in the whole of the United States. When the bubble burst, there was a series of failed banks, crashing values, zombie companies (those kept alive, since going bust would be more expensive), and similar things. Pretty much like Europe and the U.S. today.

The problem is that Japan has still not turned the corner. To take but one example, the Nikkei 225 average, the country's most widely watched stock market index, still stands at only a fraction of its value in 1990. The country is ageing fast and its population is shrinking. And that is before tsunamis and nuclear problems are taken into account.

The politicians would say that things are going to be different in Europe and the U.S. But why?

Walter Blotscher