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U.S. Economy Looking More Japanese


Is the U.S. Turning Japanese?

In the 1970s, many Americans feared Japan would set the tone for growth in the 21st century economy. One research group says that may be the case — but not in the way feared decades ago.

The Economic Cycle Research Institute, a private research firm that has been bearish on the U.S. economy, says the U.S.’s performance in this recovery is looking ominously similar to that of Japan’s “lost decades,” the period from 2Q 1992 until 1Q 2013, when Japan suffered through little economic growth and steep deflation.



The business cycle group looked at average yearly GDP growth for major developed nations as well as China for the periods of 1Q 1980 to 1Q 2001 (green bars on chart), 1Q 2001 to 1Q 2013 (yellow) and the last five years 1Q 2008 to 1Q 2013 (blue). For Japan, ECRI divided the periods to 2Q 1992, the lost decades (red), and the last five years.

The research showed that over the last five years, the U.S. grew just 0.7%, a notch below the 0.8% pace recorded during Japan’s lost decades.

“Basically the U.S. is already becoming like Japan during the lost decades,” says ECRI director, Lakshman Achuthan.

The downshift in growth is not a U.S. phenomenon. Major European economies also have seen growth slow across the three periods. And that is a major point of ECRI’s research.

“Around the world, long-term trends in growth have downshifted, already resulting in weaker recoveries and more frequent recessions than most had expected when the 21st century began,” says Mr. Achuthan.

VIEW THIS ARTICLE ON WALL STREET JOURNAL

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