Any lessons for the West from Japan's experience?
What markets here can learn from the Land of the Rising Sun
Japan is, in many ways, a unique country; many of its experiences with prolonged slow growth and ultra-low interest rates will differ from the West's.
Furthermore, due to the unique nature of the Covid-19 crisis, the recovery will not likely even rhyme with any historical examples, other than some very broad trends.
John Redwood on a 'pioneering' Japan
That said, assuming there is no major secondary infection wave, a rapid shift to the political left, major trade wars or a geopolitical crisis, the West should expect many more years of increasingly repressed interest rates and pale economic growth after the initial rebound from the lockdowns.
Western people tend to have short memories and a strong desire to overcome grave odds, but it will be a long time before confidence is restored.
It was not really until 2014 that Japan's national confidence was mostly restored from the post-1990 slump, and even in 2019 it was far from flush.
The 1968 to 1982 period in the West was a good example of how pessimism can become lastingly pervasive and for many Western citizens, the past three decades of de-industrialisation and consolidation of family firms into various superstores has been depressing.
This will, unfortunately, continue for them while for those on the leading edge of society much has gone well, but will it continue so?
Post-war Japan has been quite egalitarian, with most of its wealthy maintaining low profiles, so class divisions did not become problematic, but will wealth divisions in the West lead to major unrest and an anti-business change in political leadership?
Notably, stoicism hardly rules the day in the current Western culture.
Real estate
Western real estate prices will also be a key factor. If they decline for an extended period, like they did in Japan, such will be a major headwind.
While Japan's constantly improving earthquake construction standards and sub-par post-war building quality played a major role, declining prices of existing homes, which is the largest asset in most families in Japan, created a severe negative wealth effect.
Commercial real estate prices slumped in Japan too, and in the West they now look even more vulnerable, which also could lead to financial system stress.
This has little to do with Japan's experience, but it must be mentioned that due to the increasingly global trend towards green policies and reduced transportation usage ahead, the global energy sector dominated by Western firms, and comprising a major part of the US economy, will also likely be severely challenged in a low growth world.
Indeed, a whole swath of industries in the West will likely struggle greatly. Although Japan severely lagged in both corporate governance and propensity for industry consolidation, it eventually merged multiple firms into just a few in most industries.
Major unemployment or dis-employment (moving to poorer jobs in subsidiaries) resulted, with tent camps widely apparent in the 1990s.
They neatly bundled their belongings and tidily removed shoes outside their tents, but one should not expect the ensuing Western rationalisations to be so stoically received.
The 'good news' for a fragile Japan
Like Japan's experience, it is likely the continued aid to Western firms will eventually be criticised as creating inefficient zombies.
Unwinding aid is always painful and, like Japan, the West will see a long period of banks facing loan problems from struggling industries and consumers, as well as from property firms, coupled with questions as to whether their accounting is realistic.
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