The background of Japan's bubble economy
Behind the plaza agreement
1On September 22nd, 985, the world's five major economic powers (the United States, Japan, West Germany, Britain and France) reached a plaza agreement at new york Plaza Hotel. At that time, the exchange rate of the US dollar was too high, resulting in a large trade deficit. For this reason, the troubled United States and four other countries issued a statement announcing their participation in the exchange rate market. Since then, the yen has appreciated rapidly. At that time, the exchange rate rose from 1 USD to around 240 yen, and rose to 120 yen a year later. Due to the drastic change of exchange rate, the assets composed of US Treasury bonds suffered book losses, so a large amount of funds entered the Japanese domestic market to avoid exchange rate risks. At that time, in order to subsidize the export industries hit by the appreciation of the yen, the Japanese government began to implement the financial easing policy, resulting in excess circulating funds. In addition, there was the following background: 1. Since the late 1970s, Japanese banks have been worried about financing cases from excellent manufacturing enterprises, so they began to tend to finance real estate, retail and individual housing. 2. Since 1980s, global deflation has formed an upward channel for the stock market.
Accelerate rise
Due to the comprehensive effect of the above factors, there has been a speculative upsurge in Japan, especially in the stock market and land market. Among them, influenced by the so-called "land will not depreciate" land myth, the resale land transaction volume increased and the land price began to rise. At that time, the total price of land in 23 districts of Tokyo even reached the level of buying all the land in the United States, while banks used the rising land as a guarantee to lend a lot to debtors. In addition, the rise in land prices has also increased the book property of land owners and stimulated the desire for consumption, which has led to the growth of domestic consumer demand and further stimulated economic development. During the period of 1985- 1986, with the rapid appreciation of the yen, the international competitiveness of Japanese enterprises declined, but the domestic speculative atmosphere remained warm. From 65438 to 0987, speculation spread to all industries. At that time, the optimistic view was that as long as the land demand was high, the economy would not decline, and the market also encouraged people to keep buying stocks, claiming that stocks would never depreciate from now on. At that time, in order to name this economic prosperity, Japanese media also hoped to name it like Iwate Prosperity and SHEN WOO Prosperity. However, at that time, there were a few objections that the land price had far exceeded its actual demand and Japan's economy would fall into recession in the near future. According to the principle of economics, the increase of land price leads to the decrease of profit rate of enterprises renting factory or office land, so it is reasonable to sell land and buy debt, which will lead to the decrease of land demand. According to the theory of supply and demand, the price will eventually tend to be balanced. Japanese enterprises generally use book value to calculate land assets, so on the surface, the rate of return of enterprises has not changed, and the difference between book value and actual value leads to the increase of book property, thus stimulating Japanese enterprises to pursue the scale of total assets rather than the rate of return. At that time, many large real estate companies would seize the land by improper means with the help of underworld forces in order to obtain the land around the metropolis, which led to serious social problems. Remote rural land with no income possibility has also been fired at a high price as a leisure tourism resource. The profits from land transactions are used to buy stocks, bonds, golf course membership rights, as well as overseas real estate (such as Rockefeller Center in the United States), precious works of art and antiques, luxury sports cars, overseas tourist attractions and so on. At that time, this kind of fund was called "Japanese money" and attracted the attention of the world economy and the pursuit of businessmen. At that time, with the rise of share price, the consumption boom of buying high-end cars such as Ferrari, Rolls Royce and Nissan CIMA in Japan was also on the rise.
neighbouring country
Due to the war in Afghanistan, the arms race between the United States and the Soviet Union, and the drastic changes in eastern European countries, the Soviet Union was on the verge of collapse. In Europe, due to the serious high unemployment rate and the democratization in Eastern Europe, the international and social order is also very chaotic. America: After experiencing the economic cycle of 1980, it gradually entered the trough. The housing finance industry is in crisis, and the social credit crisis is becoming more and more serious. In addition, the current balance of payments tends to be balanced, but the domestic economy continues to be sluggish, the unemployment rate is also rising, and the fiscal deficit has set a historical record. Under such a world situation, the slogan "Japan is the best in the world" has appeared in Japan with relatively stable politics and economy, and all citizens have a premonition that the "Japanese era" is coming. At that time, in the impression of all countries in the world, Japan, which was an ordinary developing country 30 years ago, has quickly become a peanut rich country.
potential problem
The method of expecting to gain profits through the increase of asset value will become more and more ineffective with the increase of asset price. When the asset price finally stays at a high level, the ultimate asset holder will not be able to obtain income. But what is terrible is not only that. Once the asset price falls back to the previous level, the asset holder will suffer losses equivalent to the profits earned by all his predecessors. Therefore, the price of assets lacking sustainability has gradually entered a stable state. On the other hand, for Japanese cities that respect one household and one house, the rising land price has brought about a serious shortage of housing. For ordinary workers living in the center of big cities, they simply can't afford high land rent and rent, so they can only be forced to move to the suburbs. At that time, this situation led to people's psychology of buying early and earning early, which further stimulated the rise of land prices. At that time, the housing problem caused by land price also attracted the attention of the Japanese government. After that, the government adopted a policy of stabilizing land prices and put pressure on financial institutions.
lather collapse
From 65438 to 0989, Japan's bubble economy reached its peak. At that time, Japan's economic indicators reached an unprecedented high level, but the so-called bubble economy began to decline because the rise in asset prices could not be supported by industry. Once speculators lose their desire to speculate, land and stock prices will fall, which will lead to the loss of book funds. Because many enterprises and speculators have invested too much before taking the rising book capital into account, which will bring a lot of debts. With the end of the central government's financial easing policy, the possibility of maintaining Japan's domestic asset prices no longer exists. 1990 In March, the Japanese Ministry of Finance issued the Regulations on Controlling Land-related Financing to control the total land finance. This man-made sudden braking led to the accelerated decline of the bubble economy that had entered a natural recession, and led to the collapse of the long-term credit system that supported the core of Japan's economy. Since then, the Bank of Japan has also adopted a financial tightening policy, which further led to the bursting of the bubble. On February 29th 1989 15.87, the average share price reached the highest point, then it began to fall, and the land price also began to fall around 199 1, and the bubble economy began to burst. 1March 1992, the average share price of Nikkei fell below 20,000 yen, only half of the highest point 1989. It further fell to 14000 in August. A large number of book assets disappeared in just one or two years. As the price of land has also dropped rapidly, there are also great risks in loans secured by land. At that time, the non-performing loans of major Japanese banks were exposed one after another, which caused a serious blow to Japanese finance.
[Edit this paragraph] Lessons from Japan's bubble economy
Behind the appreciation of the yen
The main reason for the formation and collapse of Japan's bubble economy is not the appreciation of the yen, but the mistakes of Japan's macroeconomic policies during the appreciation of the yen, especially the three major mistakes of monetary policy in 1986- 1989. Japan's bubble economy occurred in 1985- 1990. At that time, Japan was changing its growth model, changing its development strategy, opening its domestic market and integrating. This story can give us a lot of inspiration. There is no doubt that the reasons for the formation and collapse of Japan's bubble economy are complicated, including systems, structures and policies, but back to its definition, bubble economy refers to the asset price inflation caused by a large amount of surplus funds chasing relatively scarce investment opportunities, so this story will be mainly carried out at the macroeconomic level. To explain the formation of Japan's bubble economy, we need to start with the appreciation of the yen. Although, in essence, Japan's bubble economy and the appreciation of the yen are two different events with different reasons, because they appeared in the same period and have the same historical background, there is a complicated relationship between them, which has led to some misunderstandings by public opinion. The direct reason for the appreciation of the yen against the dollar is the change of the trade balance between Japan and the United States; The fundamental reason is the change of Japan's economic strength to the United States. In the early 1980s, the American economy was plagued by stagflation. 1980 inflation rate 13.5%, unemployment rate 7%, economic growth rate -0.2%, fiscal deficit 73.8 billion dollars, trade deficit/kloc-0.5 billion dollars. In order to overcome "stagflation", the Reagan administration focused on tax reduction and stimulated economic growth through expansionary fiscal policies; The Federal Reserve raised interest rates and curbed inflation through tight monetary policy. High interest rates have increased the attractiveness of the dollar to foreign investors, and a large amount of funds have flowed into the US market, leading to the appreciation of the dollar. From 1979 to 1985, the multilateral exchange rate of the US dollar against the currencies of other 10 developed countries rose by 73%. The appreciation of the US dollar has widened the US trade deficit. 1980- 1984, the US trade deficit with Japan increased from1500 million US dollars to1300 million US dollars. At the same time, Japan's trade surplus with the United States increased from $7.66 billion to $46 15 billion. The huge trade balance makes the United States the world's largest debtor and Japan the world's largest creditor. 1985, Japan's external net assets were129.8 billion USD; The foreign debt of the United States is111400 million dollars. The deeper reason for the appreciation of the yen against the dollar is that the United States is the most developed country in the world after World War II, and the dollar has become a "super currency"; In the 1980s, Japan's economic growth rate and labor productivity had far surpassed that of the United States, and the dollar began to decline. 1980- 1985, the average labor productivity in the United States is about 0.4%, and that in Japan is about 3%; The average economic growth rate of the United States is about 1.5%, and that of Japan is about 4.8%. In other words, by 1985, both the appreciation of the yen and the depreciation of the dollar are inevitable. In fact, the process of $ falling/yen appreciating in February 1985 has already started, and the Plaza Agreement in September 1985 only accelerated (not started) this process. The main reason for the emergence and collapse of Japan's bubble economy is the mistake of Japan's macro-policy. Under the complicated international and domestic environment at that time, Japan's monetary policy was unbalanced and there were three major mistakes.
Excessive expansion of monetary policy
During the period of 1986, Japan experienced a short-term economic recession, which was called "yen appreciation depression" in history. In fact, the "yen appreciation depression" lasted for a short time, only the automatic adjustment of the market after the yen appreciated, and the Japanese economy resumed growth at the end of that year. However, out of fear of the appreciation of the yen, the Japanese government made a wrong judgment and adopted the wrong policy. Coupled with the influence of other international factors, from 1986 to 65438+ 10 to 1987, the Bank of Japan cut interest rates five times in a row, reducing the central bank discount rate from 5% to 2.5%, not only in Japan. The excessive expansion of monetary policy has caused a large amount of excess funds. In the absence of favorable investment opportunities in the market, excess funds flowed into the stock market and real estate market through various channels, resulting in a sharp rise in asset prices. This is the first mistake of Japan's monetary policy.
Maintain an expansionary monetary policy
1in the autumn of 987, the world economy grew rapidly. In response to possible inflation, the United States and West Germany have raised interest rates one after another, and the Bank of Japan is also preparing to raise interest rates. Just then, the "Black Monday" broke out in new york on June 65438+1October 65438+September 65438. Under the joint intervention of western countries, "Black Monday" was just a market panic. Soon after, people's pessimistic expectations of the world economy were replaced by optimism, and the economies of all countries showed strong growth. But that's how Japan's economic disaster began. At that time, the U.S. government was worried that if the Japanese bank raised interest rates, the funds could not return to the European and American markets in time, which might once again cause international market turmoil. Therefore, it is suggested that the Japanese government suspend interest rate hikes. The Japanese government is also worried that raising interest rates may lead to more international capital flowing into Japan, which will promote the appreciation of the yen and cause economic recession. Moreover, at that time, Japan was implementing the strategy of expanding domestic demand, and needed to increase domestic investment, reduce savings and narrow the current account surplus at a lower interest rate. Under this circumstance, the Bank of Japan decided to continue to implement the expansionary monetary policy and keep the discount rate unchanged at an ultra-low level of 2.5%. It was not until May 1989 that the central bank raised interest rates. At this time, it has been 19 months since Black Monday, and it has been 27 months since Japan implemented the ultra-low interest rate policy. This is the second mistake of Japan's monetary policy and a "fatal mistake". Extremely expansionary monetary policy has caused Japan's "economic system is full of cheap funds", and long-term ultra-low interest rates have pushed these funds into the stock market and real estate market. 1985- 1989, the average share price of Nikkei rose by 2.7 times; 1986- 1990, the average price index of six major cities such as Tokyo and Osaka increased by more than three times.
hard landing
From 65438 to 0989, the Japanese government felt the pressure and the Bank of Japan decided to change the direction of monetary policy. From May 1989 to August 1990, the Bank of Japan raised its discount rate from 2.5% to 6% five times. At the same time, Japan's Ministry of Finance requires all financial institutions to control real estate loans, and the Bank of Japan requires all commercial banks to substantially reduce loans. By 19 1, Japanese commercial banks have actually stopped lending to the real estate industry. The sudden turn of monetary policy first punctured the bubble in Japanese stock market. 1990, Japan's share price began to fall sharply, falling by more than 40%. The collapse of stock prices has caused great losses to almost all banks, enterprises and securities companies. Then, the land price in Japan began to drop sharply, by more than 46%, and the real estate market bubble burst. The sudden contraction of monetary policy and the deliberate bursting of the bubble by the central bank are the third mistake of Japanese monetary policy. After the bubble economy burst, the Japanese economy experienced an economic recession of 10 years.
Reasons for implementing long-term expansionary monetary policy
Why did the Japanese government implement the expansionary monetary policy for a long time? To answer this question, we need to go back to the starting point of Japan's bubble economy-1985. 1985 is a year of great significance in Japanese history. This year, there have been many major events in Japan that can affect Japanese history and change Japan's destiny.
1. Japan's economic and financial liberalization and internationalization have accelerated.
After the war, Japan's economy and finance were strongly "closed" and "controlled". In 1970s, Japan began the process of economic and financial liberalization and internationalization. In 1980s, this process accelerated rapidly. 1985, the Japanese government issued the announcement "The Present Situation and Prospects of Japanese Yen Financial Liberalization and Internationalization", which opened the prelude to Japan's overall economic and financial liberalization and internationalization.
2. Japan's political internationalization process is accelerating.
In the early 1980s, the Japanese government proposed that Japan should move from an "economic power" to a "political power", and Japan-US relations would become the cornerstone of the "political power". In the "Plaza Meeting" in 1985 and the "Louvre Meeting" in 1986, Japan became the staunchest ally of the United States.
Three. The transformation of Japan's economic growth model
Since 1980, the international community has been calling on Japan to open its domestic market and change its export-oriented economic growth model. Japan's 1985 economic white paper points out that the export-oriented economic growth model is no longer sustainable, and Japan must expand domestic demand to ease its relations with the international community.
Four. abstract
1985 Japan faced three strategic changes at the same time: from "controlled economy" to "open economy"; From "economic power" to "political power"; From "external demand economy" to "internal demand economy" Such a major and profound change concentrated in such a short time may make the macro policy lose room for manoeuvre. When internal balance and external balance, domestic policy coordination and international policy coordination are intertwined, it will become very difficult to weigh, select and adjust macro policies, and serious mistakes may occur because of imbalance. With the opening of the financial market, we need to face the world with a broader mind and a more peaceful mind.