Strolling through Tokyo on a Sunday afternoon, it’s hard to tell Japan’s economy is a mess. Deflation has returned, while growth hasn’t. But Shibuya Crossing remains as packed with diners, bag-toting shoppers and gawking tourists as ever. Nearby, a line of more than 50 people stretches outside a restaurant selling overpriced burgers. Lost decades be damned!
Japan had the good fortune to have become wealthy before entering its years of stagnation. Some Japanese are now suffering in an economy that’s endured four recessions in eight years; the poverty rate has reached 16 percent, its highest level on record. But for many, especially in big cities such as Tokyo, life hasn’t so much deteriorated as frozen in time. GDP per capita, on a nominal basis, is little different now than in 1992. And though the quality of many jobs has waned due to the increase of temporary work, joblessness remains a rarity. The unemployment rate is an enviable 3.2 percent.
The Shibuya crowds raise serious and uncomfortable questions about the direction of Tokyo’s economic policy. Even as some analysts urge the Bank of Japan to double down on its monetary easing program and the government to ramp up its own spending in an effort to boost inflation, there’s a good argument to be made that the approach of Japan’s policymakers has been dead wrong, and for a very long time.
This post was published at David Stockmans Contra Corner on May 5, 2016.
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