Should we become like Japan?

“When people ask: might we become Japan? I say: I wish we could become Japan.”

-        Paul Krugman FT interview

Given the consistent talk about the “Lost Decade” in Japan, it is interesting that Krugman would think that this would be a good path for comparison. While the stock market has never reached its old highs, growth in Japan has been steady. Growth has been high volatility and the strong engine of the past does not exist, but growth has been above 2%. Japan avoided some of the excesses prior to 2008 and has weathered the post-crisis period better, but this does not mean that this is a success story.

Japan has not been a model of good Keynesian policy or consistent monetary policy. It is hard to say that Japan should serve as a model of what the US should do. First quarter GDP was 4.7% but the prior quarter was .1% Japan has been much more volatile with growth than what has been seen in the US. Unemployment is rising. The rate of unemployment is below 2009 highs but still at 4.6%.