1/8
John Cochrane asks about Japan during the past three decades: "If massive deficits, including lots of 'infrastructure' are going to boost the US economy, why did they not do so for Japan?"
johnhcochrane.blogspot.com/2021/06/what-a…
John Cochrane asks about Japan during the past three decades: "If massive deficits, including lots of 'infrastructure' are going to boost the US economy, why did they not do so for Japan?"
johnhcochrane.blogspot.com/2021/06/what-a…
2/8
He suggests that if it didn't work in one case it is unlikely to work in the other, but there are obvious differences between the two economies that make their responses incomparable. First, Japan entered this period massively overinvested in infrastructure, whereas most...
He suggests that if it didn't work in one case it is unlikely to work in the other, but there are obvious differences between the two economies that make their responses incomparable. First, Japan entered this period massively overinvested in infrastructure, whereas most...
3/8
analysts agree that the US is underinvested.
This means that while infrastructure spending in the US is likely to be productive, and so will boost GDP (and, with it, the economy's real debt-servicing capacity) by at least as much as it boosts debt, in Japan much of it...
analysts agree that the US is underinvested.
This means that while infrastructure spending in the US is likely to be productive, and so will boost GDP (and, with it, the economy's real debt-servicing capacity) by at least as much as it boosts debt, in Japan much of it...
4/8
was likely to be non-productive after 1990. The fact that debt to GDP rose so sharply in Japan is strong evidence that this was the case. Perhaps more importantly, Japan's GDP after 1990 was further harmed by the effective amortization of the malinvestment of the 1980s.
was likely to be non-productive after 1990. The fact that debt to GDP rose so sharply in Japan is strong evidence that this was the case. Perhaps more importantly, Japan's GDP after 1990 was further harmed by the effective amortization of the malinvestment of the 1980s.
5/8
Second, Japanese household consumption, at roughly 53-55% of GDP, is extremely low compared to that of the US, which is at roughly 68-69%. This means Japan is overly-reliant on investment and trade surpluses to drive growth. I've long argued that Japan...
Second, Japanese household consumption, at roughly 53-55% of GDP, is extremely low compared to that of the US, which is at roughly 68-69%. This means Japan is overly-reliant on investment and trade surpluses to drive growth. I've long argued that Japan...
6/8
would never regain its previous growth rates (and from the very beginning I dismissed the possible success of Abenomics) until it had managed the difficult redistribution of income that would make consumption a bigger driver of Japanese growth.
would never regain its previous growth rates (and from the very beginning I dismissed the possible success of Abenomics) until it had managed the difficult redistribution of income that would make consumption a bigger driver of Japanese growth.
7/8
Given the huge differences in the structures of their economies and in their recent economic histories, it seems a waste of time to compare the two countries. I know that statistical comparisons are at the heart of mainstream economic analyses, but they implicitly assume...
Given the huge differences in the structures of their economies and in their recent economic histories, it seems a waste of time to compare the two countries. I know that statistical comparisons are at the heart of mainstream economic analyses, but they implicitly assume...
8/8
that the measured entities are comparable, even when they clearly are not.
that the measured entities are comparable, even when they clearly are not.
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