JAPAN STILL SUFFERING EFFECTS OF THEIR 1990 BUBBLE BURST
TOKYO All summer the stock market set records. Growth had been so robust that experts said we were witnessing the birth
of a new and better economy. America in 1999? No, Japan in '89.
Newly-rich brokers and bankers sipped green tea instead of cappuccino, but in many ways, the scene in Tokyo back then was
eerily similar to New York today.
In 1989, Japan was enjoying a prolonged bull market. The benchmark Nikkei 225 stock average soared toward 40,000,
doubling in three years.
Investors seemed to believe the good times would never end. But then Japan showed that even great wealth can disappear in a
flash. The Japanese stock market lost one-third of its value in the first three months of 1990, and it would be two more years
before it hit bottom. In some parts of Tokyo, real estate prices plunged 70 percent.
The collapse wiped out $7.9 trillion worth of business capital and household wealth between 1990 and 1996.
The magnitude of the collapse was astounding, but more troubling for many has been how long it has lingered.
Ten years after the "bubble economy" began to deflate, Kazuhide Furukawa is one of many Japanese forced to put life on hold
because of bad economic times. He lost his job as a political aide more than a year ago and has been looking for work ever
since.
"I thought I was going to be OK," he says. "Then I realized there are hardly any jobs that pay enough for me to keep my living
standard."
After stumbling along at an average growth rate of just over 1 percent a year between 1992 and 1996, Japan's economy sank
into a recession that lasted more than a year.
The economy has shown surprising signs of life this year. But while the worst may be over, economists say a full recovery could
still be years off.
Many people worry that the United States may also have a Japanese- style "bubble economy." But there are some good
reasons to believe Japan's experience won't be repeated here.
Japan's bubble expanded as investors used paper profits on stocks to make increasingly large bets in the market. Even big
companies joined in, generating corporate revenues through market speculation instead of by selling products - something that,
for the most part, hasn't happened in the United States.
And while many U.S. firms have continued to focus on restructuring and cost-cutting during the good times, many Japanese
companies did not. That failure made them vulnerable when the downturn came.
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No jobs to keep my living standards. Again the wage decline.
Jack |
