Sunday, September 19, 2010

Japan's Two Lost Decades Becoming Three

Once again Mish Shedlock from Sitka Pacific Capital has hit the nail on the head with his economic analysis.

In a recent blog criticizing US government "stimulus" and "bail outs" and other useless efforts to revive a moribund US economy, Mish has once again shown how these sorts of actions failed miserably in Japan. He also goes on to point out that, if they didn't work in Japan, why would anyone think they are going to work in the United States?

I am impressed with Mish Shedlock. He is always right on the money and, with this blog, I think he has coined a term that I have never heard of before. I think this term will stick: "Japan's Lost Two Decades Becoming Three."

Mish was criticizing the US government in his blog; at least Japan had savings and industry... Today's USA has neither. Plus today's USA has a huge foreign debt of which they will never ever be able to repay.

Japan was and still is a creditor nation. The USA is the largest debtor nation in the world - by far!

Mish slices and dices the problem for you succinctly in his blog and you can read it here: America's Lost Decade - Another One in Progress Now.

The one part of that blog that really fascinated me was the "Japan's Two Lost Decades Becoming Three" chart of the Nikkei 225 over these last 20 + years:


If history is any guide (which it isn't for investment purposes but can be a good clue) then we can see that from the top of the bubble in 1990, the Nikkei 225 stood at ¥38,900. Within ten years it had dropped to ¥20,800 - a 47% decline. This in spite of massive Japanese government intervention and "stimulus." 

Then, over the next ten years, with even more debt and stimulus, the Nikkei 225 dropped again to ¥11,408 from ¥20,800. This tallies in at about a 46% decline. 

Today, Sept. 19th, 2010, the Nikkei sits at ¥9,626.09. This is about a 16% decline this year.

If past history holds true, then we can expect the Nikkei 255 at ¥6,274 by 2020. Not a pretty thought.

So thanks to Mish Shedlock for diagnosing and giving us a name for our current malaise... Read his blog if you want to know how to implement a cure.


Keywords: Mish Shedlock, Nikkei 225, Japan's Lost Two Decades Becoming Three, Marketing Japan, Mike Rogers, Mike in Tokyo Rogers

No comments: