It is a bit of a memorable anniversary for financial markets – it’s the 20-year anniversary of the Bank of Japan cutting rates to 0% and the start of two decades of extreme monetary policy which Japan has not been able to escape from.
Japan’s strong economic growth in the second half of the 20th century ended abruptly at the start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fueled a speculative asset price bubble of a massive scale. The bubble was caused by the excessive loan growth quotas dictated on the banks by Japan’s central bank, the Bank of Japan, through a policy mechanism known as the “window guidance”.
Trying to deflate speculation and keep inflation in check, the Bank of Japan sharply raised inter-bank lending rates in late 1989. There was also impact of Basel I. directives. This sharp policy caused the bursting of the bubble and the Japanese real estate and stock market crashed. Equity and asset prices fell, leaving overly leveraged Japanese banks and insurance companies with books full of bad debt. The financial institutions were bailed out through capital infusions from the government, loans and cheap credit from the central bank (by money creation), and the ability to postpone the recognition of losses, ultimately turning them into zombie banks.
In less than a year, Japan’s Nikkei stock index plunged by 50% from approximately 39,000 to 20,000 and finally hit 15,000 by 1992. The Nikkei’s dramatic crash occurred because its value was inflated by false hopes and hype.
For economic historians Japan is really a fascinating case. If you took a snapshot of the nation’s finances and demographics today with no previous knowledge of the country’s journey over the last 30 years since its asset bubble burst, you would wonder how the country isn’t in a constant crisis. Debt to GDP is the highest in the developed world at 236%. The BoJ holds around 43% of all JGBs (Japan Government Bonds).
Japan is an example of how long a crisis can be averted for under extreme measures. It also highlights how perceptions can be turned on their heads.
Ni miaka 20 tangu Benki Kuu ya Japani ilipopunguza viwango vya riba hadi 0% na kuanza kwa miongo miwili ya sera kali ya fedha ambayo Japani haijaweza kuepuka. Ukuaji mkubwa wa uchumi wa Japani katika nusu ya pili ya karne ya 20 ulimalizika ghafla mwanzoni mwa miaka ya 1990. Katika miaka ya 1980, matatizo ya kiuchumi nchini Japani yalisababisha mlipuko mkubwa wa bei za mali. Bubble ilisababishwa na viwango vya juu vya ukuaji wa mkopo vilivyoamriwa kwenye benki na benki kuu ya Japani, Benki ya Japani, kupitia utaratibu wa sera unaojulikana kama "mwongozo wa dirisha". Ili kuzuia mfumuko wa bei na kupunguza mfumuko wa bei, Benki Kuu ya Japani iliongeza kwa kasi viwango vya mikopo ya benki katika mwaka wa 1989. Pia kulikuwa na athari ya Basel I. maelekezo. Sera hii kali ilisababisha mlipuko wa Bubble na soko la mali isiyohamishika la Japani na soko la hisa liliporomoka. Bei ya hisa na mali ilipungua, ikiwaacha benki za Kijapani na makampuni ya bima yenye madeni mengi na vitabu vilivyojaa madeni mabaya. Taasisi za kifedha ziliponywa kupitia infusion za mtaji kutoka kwa serikali, mikopo na mikopo ya bei nafuu kutoka kwa benki kuu (kwa uundaji wa pesa), na uwezo wa kuahirisha utambuzi wa hasara, hatimaye kugeuka kuwa benki za zombie. Katika muda wa chini ya mwaka mmoja, Nikkei index ya hisa ya Japani ilipungua kwa asilimia 50 kutoka karibu 39,000 hadi 20,000 na hatimaye kufikia 15,000 kufikia 1992. Mshuko mkubwa wa Nikkei ulitokea kwa sababu thamani yake iliongezwa kwa matumaini ya uwongo na fujo. Kwa wanahistoria wa uchumi Japani ni kweli kesi ya kuvutia. "Ikiwa utachukua picha ya fedha za taifa na idadi ya watu leo bila ujuzi wa awali wa safari ya nchi katika miaka 30 iliyopita tangu ""bubble"" yake ya mali ilipoanguka, utajiuliza ni kwa nini nchi haiko katika mgogoro wa mara kwa mara." Kwa mujibu wa ripoti ya Umoja wa Mataifa, kiwango cha deni la nchi kwa Pato la Taifa (GDP) ni cha juu zaidi katika nchi zilizoendelea, na ni asilimia 236 ya jumla ya nchi. BJ ina karibu 43% ya JGBs zote (Bond za Serikali ya Japani). Japan ni mfano wa jinsi mgogoro unavyoweza kuepukwa kwa muda mrefu chini ya hatua kali. Pia inaonyesha jinsi maoni yaweza kugeuzwa.