The earthquake and tsunami that struck Japan ten days ago left cities in ruins and lives shattered. As if the impacts from these natural disasters were not devastating enough, the nuclear energy crisis has piled on even more difficulties to a nation that was already dealing with a remarkably long bout of recessionary years. In the early 1990's, Japan suffered a price bubble collapse on assets. Some have termed the period from 1991-2000 "the lost decade" and some have even grouped the period from 2001-2010 in the 'Lost Decades'.
"The Bank of Japan began increasing interest rates in 1990 due in part to concerns over the bubble and in 1991 land and stock prices began a steep decline, within a few years reaching 60% below their peak."
With a wildly lopsided population ratio, Japan's retirees are quickly approaching the number of young people; a concern about social security and elderly support bears on the minds of the government. The strengthening of the Japanese yen following the credit crunch did not help Japan. Manufacturers looked to other countries, with more affordable firms to produce high-tech chips and electronics (A monopoly Japan once owned). Incidentally, Japan lost its 42 year title as the world's second largest economy to China. Japanese leaders have cycled so frequently within the past decade that it is questionable whether any hope is coming soon. With the new addition of the natural disasters that have shook Japan, it is important to look at the effects they will have on Japans economy in the future.
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A comparative view of the damages the earthquake/tsunami duo had on the world economies. |
The drop in the NIKKEI Index speaks for itself, with many investors withdrawing money from the market. How this disaster plays into the future of Japan's economy deserves an introspective look on the factors that face Japan today, which I may entertain in a future post given the time...
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