Are we headed for our own lost decade?

Bruce Watson

Will our new-found miserly ways keep economic recovery out of our reach? What does the situation in Japan tell us?

Over the last few weeks, the news has been filled with stories about consumers clamping down on discretionary spending. Increasingly, analysts are drawing connections between the changes in American spending habits and the change in Japanese culture during the famous "lost decade" of the 1990's and 2000's, a period of economic malaise that brought reduced wages, a depressed stock market, and a wave of miserly behavior that continues to undermine Japan's economy.

While Japan was once among the world's top consumers of luxury items, the lost decade wreaked havoc on its spending habits. Whiskey consumption, for example, is currently one fifth of what it was during its peak, and a recent survey demonstrated that the desire to own a car has halved in the last nine years.

Part of the reason for this lies in the fact that Japanese businesses, which once offered cradle-to-grave security, now rely on temp workers. In fact, 48% of workers under 25 are temps, a trend that has resulted in less security, lower wages, and fewer luxury purchases. However, even among older workers, the trend has long veered toward saving money; in many ways, Japan's citizenry continue to display the kind of shell-shocked thrift that most Americans associate with the Great Depression.