Watch and learn: Japan offers America a lesson on dealing with bad economy

Are the lessons from Japan's "Lost Decade" in store for Americans n the coming years, as we experience the fallout from the current ugly recession?

If they are, things will be bleak indeed, as Japanese consumers exacerbated deflation, saved money in every way they could such as reusing old bath water to do the laundry, rationed vegetables so much that cabbage stew becomes a staple meal, saw wages shrink even as companies rebound, and became a nation of temp workers as companies looked for ways to cut costs.

Those are just some of the adaptations Americans may have to follow from the Japanese, according to a New York Times story on the issue.

A boom in export to the United States and China helped Japan pull itself out of the Lost Decade of the 1990s, although Japanese consumers are still afraid to spend. Per-capita consumer spending rose only 0.2% between 2001 and 2007 in Japan.

Its economy is falling again as exports dry up and domestic consumption falls. In the last three months of 2008, Japan's economy shrank at an annualized rate of 12.7%, the sharpest decline since the oil shocks of the 1970s, according to the Times article.

To compete with cheaper markets, such as Taiwan, Japanese businesses have cut jobs and wages and relied on more temporary workers who have no job security and fewer benefits. Such nontraditional workers now make up more than a third of Japan's labor force. The Times reports that 48% of workers age 24 or younger are temps.

That amount of work is leaving the younger workers feeling apprehensive about their jobs, and spending less of their money. One area that is being hit is car sales, with sales falling by half since 1990. A survey last year by the business daily Nikkei found that 25% of Japanese men in their 20s wanted a car, down from 48% in 2000.

Deflation is also a problem in Japan, as it is in America. Deflation is when prices and wages spiral down because consumers hold down spending, in part because they expect goods to be cheaper in the future. It's a vicious circle that often gets worse before it gets better.

If nothing else, maybe the lessons to be learned from the Japanese adapting to a recession could lead Americans to at least one benefit: Saving more money.

Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job search at

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