<<It is simply a case of too much money having no where to go>>
Yes, I agree, in fact you could look at the yen problem as a classic deflationary model. Economists have been saying for centuries that free trade results in a superior domestic economy even if other countries continue protectionist policies. This is of course politically impossible, as vested interests always scream for market protection, especially ineffecient industries and labor unions.
I think the best way of looking at this is moralistic, ie. the Japanese are paying the price for decades of the most extreme protection of home markets and general xenophobia, while the U.S. has (by some miracle) engaged in a marked effort to destroy barriers to international trade and has allowed the Japanese fairly free access to US markets without reciprocity.
The Japanese paranoia also embraces a heavy deterrence of domestic consumption. So they refused to spend it, now they have just lost it. They shoulda' had some fun with all that money that's now just down the drain, or sitting in the pockets of US citizens. But, hey, thanks for the cheap cars, tv's, and computer components. And the cheap loans, which have cut at least a full point off the US CPI.
The Chinese, may I point out, despite a political system even more closed than the Japanese, are not making these mistakes as they dismantle their socialist economic system. They are much better merchants by nature, and are more comfortable dealing with foreign markets. But they allow consumption (despite the communist economic overlay), are eager for foreign equity investment partnerships, and have a comparatively open consumer market.
Strange world. If someone had told me 20 years ago that China would prevail over Japan because of superior implementation of market economics and more openess to foreign trade, I'd have suggested therapy. |
