AHC/WI: No Japanese economic bust

It was not too long ago in the 1980's when Japan occupied a position very similar to that which China enjoys today: a rising, booming market enjoying considerable economic growth and competitiveness, which many were pegging to have the potential to surpass the United States as the world's largest economy. But then, in the latter part of the decade, a huge real estate bubble (not unlike the U.S. has experienced only recently) grew as speculation went wild, and when it burst around the onset of the 90's, it sent Japan into a spiral of deflation and stagnation, causing a Lost Decade and a continued sense of stagnation and decline which continues to this day and is further exacerbated by the country's increasingly concerning demographic problems (namely the rapidly aging population and miniscule birth rate).

A good overview of the causes of the bust and events since then can be read here:

http://www.japanechoweb.jp/jew0109/

So what can be done to prevent this bust? Either to prevent the bubble in the first place, or minimizing its fallout (say, if the Bank of Japan had been faster to cut interest rates, as many say they should've done)? What sort of effects would happen if Japan was able to avoid its lost decade and continued to experience growth (even if it's more modest than in the 70's and 80's) and sustainability?
 
Well first things first, Japan's pretty much at the limit of it's capabilities (overcharged even). The only native resource it has is land, human and capital. There's only so much you can invest into the later 2 until diminishing returns dictate that you outsource it to an Indian grad or w/e. The reason for the bubble in the first place was the lack of good capital or human ventures left to invest in.

It's a problem with human behavior, and that's one of the most temperamental things ever. Japan was caught up in the boom time mentality, while it's not impossible it would be massively unpopular and have to be done accidentally. (macro-economists unfortunately are also prone to overoptimistic atmospheres, you'd have to take the advice of one of the nay-Sayers nutjobs who always advocate the coming of the end ). Alternatively you need to overcome the nationalists and xenophobes and get japan to realize it has excess capital and invest it offshore, your best bet would probably be China opening up earlier.

So will you get Greater Japanese growth? Not much, instead you'd get the Japanese nationals with greater stakes overseas.
 

BlondieBC

Banned
To avoid the bust, you have to prevent the boom. The seeds of 1986 were sown in the early 1980's and 1970's. So you have to do all the unpleasant things in these time periods - Higher taxes, crackdown on bank leading to real estate (The land under the emperor place was worth more than all of california), accept higher unemployment, smaller trade surpluses, etc.
 
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