http://www.eastasiaforum.org/2009/03/17/what-do-we-know-about-japan/ Economics, Politics and Public Policy in East Asia and the Pacific Sun, 12 Feb 2012 19:28:35 +0000 hourly 1 http://wordpress.org/?v=3.2 http://www.eastasiaforum.org/2009/03/17/what-do-we-know-about-japan/comment-page-1/#comment-16365 Doug Ostrom Mon, 23 Mar 2009 15:26:59 +0000 http://www.eastasiaforum.org/?p=2694#comment-16365 I wonder whether Japan is teaching us something about the need for more sophistication in macro models. It appears to have developed a rather extraordinary set of drivers of economic activity in recent years that makes it--contrary to the existing economic models I have seen--extraordinarily sensitive to economic downturns abroad. If it now exports capital goods and high-end consumer goods (Lexuses) and depends for GDP growth on those plus domestic capex to add capacity to make that stuff, then it is very vulnerable in a way it was not in the past, when economic tsunami abroad had measurable, but diluted effects in Japan. Now the tsunami seems to gain strength as it heads for Japan. Put another way, it is subject to powerful accelerator effects, or so it would seem. I wonder whether Japan is teaching us something about the need for more sophistication in macro models. It appears to have developed a rather extraordinary set of drivers of economic activity in recent years that makes it–contrary to the existing economic models I have seen–extraordinarily sensitive to economic downturns abroad. If it now exports capital goods and high-end consumer goods (Lexuses) and depends for GDP growth on those plus domestic capex to add capacity to make that stuff, then it is very vulnerable in a way it was not in the past, when economic tsunami abroad had measurable, but diluted effects in Japan. Now the tsunami seems to gain strength as it heads for Japan. Put another way, it is subject to powerful accelerator effects, or so it would seem.

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