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Robert Samuelson | Stimulus: The lesson from Japan





WASHINGTON — Japan’s new prime minister, Shinzo Abe, is trying to revive the country’s flagging economy, and we could all learn from the exercise. You may recall that, in the 1980s, Japan was widely anointed as the next economic superpower, displacing the United States. It’s been a long slide since. In the 1990s, the "bubble economy" of high stock and real estate prices burst. The stock market is roughly a quarter of its high. Land prices have tumbled to 1975 levels. Since 2000, economic growth has averaged less than 1 percent annually. Government debt has ballooned to 214 percent of the economy (gross national product), about double the level of most advanced countries. Some superpower.

To get the economy moving, Abe has proposed a "stimulus" package of 10.3 trillion yen ($114 billion), about 2.2 percent of GDP, and pushed the Bank of Japan (BOJ) — Japan’s Federal Reserve — to ease credit. This is familiar stuff. For years, Japanese governments have adopted stimulus plans. Since 1995, budget deficits have averaged 6 percent of GDP; that’s why debt (all past deficits) has exploded. The BOJ has repeatedly eased credit. In 1999, it cut short-term rates to near zero. It has had two episodes of "quantitative easing" — pumping more money into the economy — one from 2001 to 2006, the other from 2009 to now.

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