In the ’80s, everyone wanted to be Japanese. Management consultants used Japanese words to describe commonplace insights. For example, instead of saying that businesses always need to try to do things better, they referred to “kaizen” as if it were the secret of success. And US economists urged the Reagan Administration to have an “industrial policy” – because that was what Japan had.
Japanese businesses were the envy of the world. Japan was the world’s second largest economy. But in growth and stock prices it was Numero Uno.
It turned out, as it always does, that Japan did not have the secret to everlasting success. Instead, what it had was what comes before a fall. The stock market crashed in Tokyo in 1989. The Japanese economy entered a recession. At first, the experts believed it was temporary. They urged investors to take advantage of the opportunity to buy into Japan, Inc. at record low prices. They thought Japanese industry was unstoppable…unbeatable. It would recover in no time, they said.
But Japan, Inc. didn’t recover. Instead, it went into a long, drawn-out recession that lasted year after year…with on-again, off again deflation…and several stock market rallies. Each time stocks rallied, they fell again. Each time the economy began to grow…along came another setback. This continued for the next 20 years…until March of this year…when Tokyo stocks hit their lowest point for the whole bear market. A generation of investors had been nearly wiped out. Over two generations they had made nothing. Trillions worth of wealth had been erased.
Read the rest at: MarketOracle.co.uk
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