Thread by @michaelxpettis

Contrary to what many believe in China (and abroad), the Plaza Accord was not “a major cause of Japan’s asset bubble in the late 1980s and the following lost decades of economic stagnation.” It was Japan’s structurally high savings rate...
scmp.com/economy/china-… via @scmpnews

@SCMPNews ...even before the accord, which set off the monetary expansion that was the counterpart of Japan’s large trade surplus.
Yen appreciation should have resolved this, but the problem was compounded after the Plaza Accord when Tokyo countered yen appreciation by lowering...

@SCMPNews ...interest rates and expanding credit. This only served to transfer income from ordinary households, and so raise savings even further, creating an even bigger surplus and setting off the final, most violent stage of Japan’s asset bubble – along with soaring debt and a...

@SCMPNews ...massive bad-investment spree. It can’t be just a coincidence that the three largest trade surpluses in the past 100 years (the US in the 1920s, Japan in the 1980s, and China in the 2000s) were all associated with massive bubbles and soaring debt, and that the first two...

@SCMPNews ...resulted in very difficult adjustments. (It will be interesting to see how Germany adjusts in the next few years, but it has been able to sidestep the soaring FX reserves that afflicted the other three.)
But Japan’s bubble didn’t have to happen to nearly the extent it...

@SCMPNews ...did: after all the Plaza Accords forced up the German mark as much as it did the yen, but because Berlin never responded the way Tokyo did, it never suffered the subsequent consequences. Beijing however seems determined to implement a slow-motion version of the Japanese...

@SCMPNews ...experience, in part because it has misread the history but wants to avoid what happened to Japan.