Given the contradictions, Japan isn't an attractive place for private investment. A declining population reinforces the effect. Katz of the Oriental Economist suggests spurring growth by dismantling protections for sheltered domestic industries. Higher growth would emerge as "inefficient firms die [and are] replaced by better firms." But Japan's leaders have generally shunned this complex and contentious approach. Once the present stimulus fades, Katz writes, it's likely "Japan will fall back to stagnation."
The United States isn't Japan. The American economy is more flexible and entrepreneurial. The natural gas and oil boom is a godsend. Housing is reviving. Still, similarities with Japan loom. Growth rates have been stubbornly low. Both countries rely on stimulus policies — cheap credit, big deficits — to cure problems that are fundamentally structural and psychological. The parallels are worrying.
Robert J. Samuelson is a Washington Post columnist.
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