Monday, January 23, 2012

Deleveraging in Japan

The System of National Accounts Yearbook for FY2010 is now out; Japanese GDP data unfortunately are not available very promptly and many subaccounts are only available on an annual basis. Anyway, long-standing frustrations aside, the data highlight first the tendency of the economy towards an excess of private savings since 1970. Tracing the outworkings of that provides one way to organize what has happened in the macroeconomy over the past 40 years, with the growth of both current account surpluses and government deficits, in the context of two bubbles, in the 1972-3 period and in the era ended abruptly in 1991.
More sobering from today's standpoint in the US and the EU is the magnitude and duration of deleveraging. Unlike in the US, the late 1980s bubble was driven by corporate borrowing; households were for example net sellers of real estate, particularly land. And so it's corporate deleveraging to which we need to look; that's gone on for 15 years. In the US, the household sector is central, and I don't think the story will be as bad, helped by generational dynamics, foreclosures and population growth. I won't try to model such here. Just look at the for 1955-2010, splicing together discontinuities due to the shift from SNA68 to SNA93.