Econ Lessons from Japan (JAPAN)

Searching the reasons for Japan's "lost decade" — the deflation and stunted growth said to have plagued Japan ever since the collapse of the "bubble economy" in the early 1990s — has long been popular among U.S. and British commentators seeking an answer to the West's current economic problems.

The interest is welcome. But some of the results are bizarre. Almost all the main U.S. media, the conservative Wall Street Journal in particular, have run articles saying the blame lies with Japan's post-bubble, Keynesian-style infrastructure spending.

Do these people have the slightest idea of what has been happening in Japan? Japan's economy prospered in the brief periods of increased infrastructure spending. It collapsed when this spending was cut. To argue that the collapse was because of the spending is like saying food is bad for you.

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