U.S. Outpacing Japan's 1990s Economic Response

Avoiding Japan’s 1990s-era macroeconomic mistakes is job one for U.S. policymakers. So far, so good. Japan’s poky, unimaginative response to bursting credit and real-estate bubbles turned what should have been a recession into a decadelong malaise. Most economists predict the U.S. will be growing again within the next 12 months. While there is a “remarkable resemblance…between the U.S. crisis and Japan’s ‘lost decade,’ ” Kiyohiko Nishimura, deputy governor of the Bank of -Japan, tells NEWSWEEK, the good news is that the tape of Japan’s financial swoon that we’re watching is running on triple-fast forward. Over the past year, “one month in the U.S. is equal to six or seven months in Japan,” Nishimura says. America’s central bank and political system are wired to act more rapidly than Japan’s calcified bureaucracy. But U.S. policymakers clearly learned from Japan’s example. Japan’s central bank didn’t adopt a zero-percent interest-rate policy until February 1999, more than eight years after the troubles began; the Federal Reserve did so within 20 months. Japan delayed injecting public funds into banks until 1998; America’s controversial TARP was passed in October 2008, about 16 months into the crisis. In 30 months, the U.S. has dealt with as much financial trauma as Japan did in nearly 12 years. Now, if only Amtrak officials would spend some time learning from Japan’s bullet trains.

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