The econ team over at Wachovia argues that rather than "reaching back decades for a guidepost to the trajectory of the U.S. economy over the next few years, the Japanese experience of the 1990s may be more illustrative than the Great Depression of the early 1930s." And what was that like?
1) The Nikkei stock market index climbed about sixfold between late 1982 and the last trading day in 1989, only to give up most of its gains over the subsequent 14 years.
2) Residential land prices in Japan have dropped about 40 percent since 1990.
3) Not only did Japanese asset prices tumble, but the real economy stagnated. During the highflying decade that spanned 1980 to 1990, Japanese real GDP growth averaged nearly 4 percent per annum. Between 1991 and 2003, which coincided with the Nikkei's nadir, the country's average growth rate dropped to only 1 percent per annum.
But in the end, Wachovia thinks we are in store for merely a "few lost years" rather than a lost decade since we are moving more quickly than Japan did to deal with banking problems. So we've got that going for us.