How Japan lost more than a decade

By Howard L. Simons
As a new crop of freshmen heads off to school, their parents and others will be receiving e-mails along the lines of “Today’s freshmen have never dialed a phone, not had a microwave, were born when George Bush 41 was President,” etc. No one may reference that today’s freshmen never had to read 1980s-vintage articles and sit through management seminars telling them how Americans really needed to be more Japanese. Youth is well-served.

The Nikkei 225 hit its all-time high of 38,957 at the very end of December 1989, and has spent the subsequent 20-plus years suffering through Japan’s Lost Decade(s). They have turned themselves into a veritable laboratory of failed policies during that time by trying everything to jump start both the economy and their financial markets. Their public debt soared to more than 210 percent of GDP by mid-2010, their short-term interest rates have been near zero percent for more than 11 years, and they began quantitative easing when George Bush 43’s presidency was less than two months old.

Analogies
Just as correlation does not imply causality, a good analogy really is not much more than eye candy tossed before others (today’s freshmen have never lived in a world without blogs). However, the basis for technical analysis is the immutable nature of human behavior; this should mean market patterns line up over time regardless of the underlying markets, nations or cultural differences.

For the complete article, see the September 2010 issue of Active Trader magazine. Click here to subscribe.



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