Check Out The BoJ Governor's Awesome Presentation, Where He Warns The US Is Just Like Japan

Masaaki Shirakawa

Photo: BIS

The Governor of the Bank of Japan, Masaaki Shirakawa, spoke before the Second International Journal of Central Banking last week on one subject: Is the U.S. turning Japanese? (via Pragmatic Capitalist)

Click here for the presentation >

In his presentation, Shirakawa compares the two economies, noting the correlations between Japan’s lost decade and the current U.S., comparing metrics like core inflation, bank loans, and central bank balance sheets.

The du jour comparison of the U.S. and Japanese economies has come under a lot of criticism for its exclusion of cultural and demographic issues, but from a purely economic standpoint, there is a lot for that comparison to stand on.

What might be most alarming in this presentation is what powered Japan’s rebound: exports.

Who would consume those U.S. exports, remains to be seen, as Europe is experiencing similar problems and the emerging markets of China, India, and Brazil may not yet be ready for prime time.

Inflation in the U.S. is following Japan's downward path lockstep.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

This may be the anemic growth the U.S. has to look forward to.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Government bond rates fell in Japan, just like they are here.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

And the on again, off again approach fiscal stimulus looks similar.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

During a lost decade, there is plenty of room for a double-dip.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Output has declined more dramatically for the U.S. and Europe in this crisis, due to weakened global demand.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

The Japan demographic issues played a key role.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Japan's deflation has been mild, not overwhelming to the economy.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Japan had lower inflation expectations, and now the U.S. is follow on.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Compared to the Great Depression, Japan's deflation has been minimal.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Inflation has fallen due to service costs in Japan.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Japan, like the U.S., had a mild recovery in its deflationary period.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Policy actions not disimilar from the U.S.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

The Fed's balance sheet has grown, though not at the pace of the BOJ.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

The correction for Japan came in three steps. Unknown whether or not the U.S. will play out similarly, though the debt one is clearly happening.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Bank loans have dropped off in the U.S. at a much greater rate than Japan.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

The monetary base has widened similarly in the U.S. to Japan.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Demographically, Japan stands apart.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

No correlation between inflation and growth in the U.S.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Wages continue to decline in the U.S.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Perhaps counter intuitively, the propensity to consume increased during deflation in Japan.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

Japan was able to recover because of external demand. The U.S. may not have that.

Source: Masaaki Shirakawa, Governor of the Bank of Japan, via Pragmatic Capitalist

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