Japan’s Long-Awaited Recovery

Japan’s economy has been in the doldrums for years now, with occasional small periods of modest recovery that quickly died out again. But things may be changing, finally. The Economist (among many others) has been pointing out that, as they put it in a recent article, “for the first time in a decade, Japan is enjoying an upswing that could actually last.”

Why is this finally happening? In another article The Economist gives their take on it:

MORE than a decade ago, Japan chose the wrong path to economic recovery. Faced with the mountain of debt on which its bubble economy had been inflated, the authorities could have taken the quick route: swiftly writing off bad loans and easing the pain with loose monetary and fiscal policy. Instead they have muddled along, wandering down many a dead end in the process. Even so, better times are in sight for many of Japan’s companies, long burdened by deflation, dismal profits and debt. The country now has a central-bank boss who understands the deflationary problems far better than his predecessors (see article); profits are soaring; and bad debts have been sufficiently reduced that in important ways Japan’s biggest companies are nearing the end of the post-bubble clean-up.

Today we received some concrete proof that this time, Japan’s recovery may indeed be different:

(CNN) — The world’s second-largest economy, Japan, has grown at its fastest rate in almost 14 years, new government figures show.

Robust exports and industrial output helped lift the economy in the December quarter, delivering better than expected growth… On an annualized basis, GDP growth was 7 percent — well above the median forecast of 4.6 percent and faster than anything Japan has seen since the June 1990 quarter.

This is exceedingly good news for Japan. And we’ve all been waiting long enough now, so it’s not a moment too soon.