Courtesy Reuters

Robert Madsen

In "The Japan Fallacy" (March/April 2009), Richard Katz argues that it is wrong to see the economic stagnation Japan suffered in the 1990s as a precedent for what is now happening in the United States. The U.S. crisis, he says, is smaller in scope and has elicited a more forceful government response; it will therefore prove significantly less damaging. But his focus on the U.S. economy is misplaced: it is not North America but rather the entire world that is on the verge of a Japanese-style disaster.


Both Japan's "lost decade" and the current global debacle stem from a combination of excess savings and the deflation of immense asset bubbles. Japan's troubles began in the mid-1980s, when the baby-boom generation entered late middle age, the stage in life when people everywhere save a high proportion of their incomes

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  • ROBERT MADSEN is a Senior Fellow at the MIT Center for International Studies. RICHARD KATZ is Editor in Chief of The Oriental Economist Alert and the author of Japanese Phoenix: The Long Road to Economic Revival.
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