The lost decade

DaDa / tr. by Phil Newell)

The rapidly rising yen has led to soaring stock and property markets, and capital has fled the real economy in pursuit of virtual wealth, leaving only a lost decade for the Japanese economy. What the editor wants to popularize science for everyone today is the Japanese bubble.

Rockefeller Center, located on Fifth Avenue in Manhattan, New York City, is named after American oil tycoon Rockefeller. It is one of the landmarks of the United States and a symbol of wealth and power. However, in the 1980s, the Rockefeller Center was acquired by Japan's Mitsubishi, when the media exclaimed the Japanese invasion.

This is the masterpiece Sunflower by Dutch painter Van Gogh. In March 1987, the world was shocked when a Japanese company sold the painting for nearly $40 million at Christie's in London, setting a new auction record for Van Gogh's work. Between 1985 and 1990, the auction prices of many world-famous paintings were refreshed, and almost all the buyers were Japanese. This is only a well-known case of Japan's large purchases of overseas assets, and the direct reason for Japanese residents and companies to buy overseas assets is the sharp appreciation of the yen, which began at a secret meeting in 1985.

In the early morning of September 22, 1985, a Japanese official, dressed in a golf suit, hurriedly boarded a plane to New York. He was Takeshita Noboru, then Japan's minister of Tibet. At that time, the Tibetan minister was in charge of finance, taxation, you and finance, and was the core decision maker of Japan's economic affairs. The purpose of Takeshita Noboru's visit is to attend an important international conference attended by finance ministers from the United States, Germany, France and Britain. At the meeting, the finance ministers of the five countries reached a series of agreements, the most important of which was joint intervention in the foreign exchange market to allow the dollar to depreciate in an orderly manner against major currencies. Since the meeting was held at the Plaza Hotel in New York, the interest agreement was called the Plaza Agreement by the media. Before the signing of the Plaza Accord, Japan experienced rapid growth for more than 20 years, and its economy ranked second in the world. At that time, Japan relied on cheap Japanese yen and superb craftsmanship to make its products sell well all over the world, making it the largest trade surplus country at that time. Due to the influx of US dollars into Japan, Japan's foreign exchange reserves invested heavily in bonds. In 1985, Japan replaced the United States as the world's largest creditor, while the United States' foreign trade deficit was expanding. Therefore, the United States hopes to enhance the export competitiveness of American products and improve the balance of payments of the United States through the depreciation of the US dollar.

(above, Takeshita Noboru)

Less than three years after the Plaza Accord was signed, the yen seemed to be on a rocket, soaring from 250 to 120 to the dollar. At that time, Japan had already spent a golden decade and completed the plan to double its national income. under the loose monetary policy, the process of urbanization in Japan was significantly accelerated, with the appreciation of the Japanese yen and loose local currency. this has directly driven the investment trend in Japan at home and abroad. Buying a large number of assets overseas and investing in the stock market and property market at home, the two super bubbles soared into the air, the Nikkei index of the stock market soared from more than 10,000 points to more than 40,000 points, and the property market was even more noisy. In the craziest times, the value of land in Tokyo alone is equivalent to the total land price in the United States. Japan's economy has once again entered a period of rapid growth amid the hustle and bustle of asset bubbles and urbanization, and Takeshita Noboru, the Tibetan minister who signed the Plaza Accord on behalf of Japan, was crowned prime minister in 1987.

Loose money brought inflation, and the Japanese government began to implement a tight monetary policy. When the Bank of Japan raised interest rates and tightened monetary policy five times between 1989 and 1991 to curb speculation, the two bubbles burst, with the stock market plummeting by more than 70 per cent between 1989 and 1990 and the property market by more than 70 per cent between 1990 and 1992. Japan's economy has since bid farewell to the era of high growth, when Takeshita Noboru has been unable to recover. He stepped down in 1989 because of a political scandal.

In 1995, due to poor management, the Rockefeller Center acquired that year was sold back to the Americans at half price, and many of the famous paintings acquired by the Japanese were shipped back to the auction house before they even opened the boxes. Around 1990, it was known as the inflection point of Japanese economy. Since then, Japan has formed a model of low growth, low interest rates and high debt, which is called a decadent decade by future generations. At that time, a large number of overseas assets purchased as a result of the appreciation of the yen have become a major pillar of the Japanese economy, so there are two Japanese statements today. One is Japan's local community economy, which has been in the doldrums for a long time, and the other is that the overseas assets of Japanese nationals continue to repatriate their income to the mainland. Up to now, the overseas assets and remittance income owned by Japanese nationals are still the highest in the world.

For many years, the rise and burst of the Japanese economic bubble has perplexed people like a riddle. Some people blame the appreciation of the Japanese yen and capital outflows brought about by the Plaza Accord, while others interpret it as the rise and fall of speculative capital and the bursting of the bubble. some people think that this is, after all, the course of the economic development model.

The science popularization of the editor ends here today. I'll see you next time.