OPPapers.com

Socialism Today

Socialism Today The monthly journal of the Socialist Party

Home
Issue 55
About Us
Back Issues
Reviews
Links
Contact Us
Subscribe
Search

When bubbles burst
Biggest-ever Keynesian programme
Political paralysis
It hurts when bubbles burst

With the US economy now clearly in a downspin, parallels are being drawn with the situation ten years ago when Japan's stock market 'bubble' collapsed, plunging the economy into a prolonged period of stagnation. LAURENCE COATES looks at the Japanese experience.
This article first appeared in Offensiv, the weekly paper of Rättvisepartiet Socialisterna (Socialist Justice Party), the Swedish section of the Committee for a Workers' International.
AT THIS YEAR'S World Economic Forum in Davos, Japan's prime minister Yoshiro Mori revealed that the so-called 'lost decade' of the 1990s had cost the Japanese people 1000 trillion yen ($8,000bn), an amount equivalent to twice the country's gross domestic product (GDP). At the same meeting, Goldman Sachs economist Kenneth Courtis summed up the mood of world capitalism: 'The only way you can be optimistic about Japan is to look at the charts upside down'.
The collapse of Japan's asset bubble delivered a knock-out punch from which the economy has not recovered. Now the country is heading for an even worse downturn.
The Tokyo stock market's Nikkei 225 index has plummeted 35% in the ten months (up to February) since Mori took the helm, wiping out $884bn in share values - about four times Sweden's GDP. Stock markets plunged around the world last year, especially in Asia, taking their cue from the NASDAQ. In Japan, given the web of cross-shareholdings which link banks to huge business clusters called keiretsu, the Nikkei's slide is causing panic. It could drag bank balance sheets into the red, by the time accounts are filed in March, the end of the fiscal year. This could trigger a new banking crisis.
At the time of the last...