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Uk Economy Slides Towards Japanese-Style Funk

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Structurally, the Japanese economy is a world apart from the UK, with relatively high levels savings and investment, a fast ageing population, massive foreign exchange reserves and a strong current account surplus.

Unlike Britain, with its heavy dependence on service industries, Japan remains a manufacturing powerhouse. It's also a substantially self-sufficient – or "closed" – economy that discourages both inward investment and immigration.

When the financial crisis first began, it was therefore easy to dismiss suggestions that Britain, and perhaps other advanced economies too, would soon be following Japan into decades of deflation and lost growth.

There are many similarities between today's Western banking crisis and the Japanese financial crisis of the early 1990s, but the scale of the preceding credit and asset price bubble in Japan was also much bigger; what is more, the policy response this time around has on the whole been better.

Even so, things are beginning to look unnervingly similar to what happened in Japan.

Interesting that this is cropping up in the mainstream press, although I noted in the past that Japan got to tread water because it could trade with the rest of the world, now the entire globe is just a bit past foobarred I'm uncertain how we can tread water and stand still for several decades like the Japanese.

And the debts that the Japan has may finally become due.


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This line was explained in detail on Newsnight by a Japanese bloke from Nomura prior to the election when looking at Spotty Gideons planned public spending cuts and their likely effect on the less than powerhouse UK economy. Prescient stuff but from a man who really ought to know.

However, what does my head in a bit is when folk on here talk about Tokyo property prices falling 90% and suggesting that therefore that must happen here. It just isn't that simple. I tell you now HPCers, if one buys a new property in an average area (ie not upmarket Aoyama /Hibiya/Nakameguro) then you are always looking at something like a 20% plus fall in five years anyway...'cause in theat market new is good and second hand just isn't. Conversely, I wish some fifties apartmens in Aoyama because they have pretty much held their value or gone up despite the downturn. So the 90% thing isn't all it appears when you consider the local market. Maybe Ken Ishikawa or somebody can back me up on this (or not) with some detailed local stats.

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Bloody hell! I just read that Telegraph quote again. Does the Torygraph think that cutting public spending was part of that "whole lot better" response? As our whole economy is predicated on debt funded consumption and banking we will just shrug it off ! Unlike the Japanese, who make a real lot (clever) stuff and export it and who could settle their gigantic public debt from total private savings if they had to, I think we are in a somewhat worse position anyway and as the man from Nomura explained, with Osborne n Dave in command cutting public spending too, generally fooked in short order.

Still, no 90% property falls I'm afraid.

Edited by clockslinger

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My thesis is Japan is more technologically advanced and especially in 1990 was a long ways ahead in efficiency than Western nations. So they hit the end game of pure capitalism sooner than Western nations did. But now we've hit the end game too.

Japan had some options in 1990 that we don't have today. Namely they could keep exporting into growing Western economies and in doing so keep a large number of Japanese productively employed. Even though that was a weak substitute for actual domestic consumption it was politically very popular and the path of least resistance for Japan.

The USA, UK, EU nd friends don't really have that option. We can't export our way out, because the real size in exchange terms of the developing world is too small. So at some point we either have to just accept a long slow grind down to oblivion, or choose to have domestic led consumption.

All good things come to an end. The pure capitalist system worked for hundreds of years, but people intuitively understand it just means lower and lower standard of living for the majority of citizens.

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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