The increase of GDP in Japan has been below the norm since the early 1990s, as this graph from Thought Offerings shows:
|Graph #1: GDP (Japan) Flat since the Early 1990s|
The response of the monetary authority was to increase money. You can see it in M1 relative to GDP:
|Graph #2: M1/GDP (Japan) Rising since the Early 1990s|
The ratio starts out low, but begins to rise just as GDP growth goes flat in the early 1990s. At its high point, the ratio is greater than one: The quantity of money M1 increased until it surpassed GDP.
Lesson 1: No recovery was created by increasing the money.
Despite the manipulations of money, debt in Japan remains high:
|Graph #3: GDP (red) flat, M1 (blue) rising, Debt (yellow) above all|
From McKinsey, via the Thought Offerings post, a breakdown of Japanese debt by sector. As hbl notes at Thought Offerings, "public debt expansion has exceeded private debt reduction":
|Graph #4: Components of Japanese Debt|
The graph shows household and financial debt roughly stable since the late 1980s. It shows nonfinancial business debt stable until the late 1990s, then declining.
And it shows government debt increasing more and more since GDP went flat. As one reads in the Manifesto that I did not sign,
government debt [in Japan] now exceeds 200% of annual GDP
All of that increase in government debt has not restored the Japanese economy, even after 20 years and more.
Lesson 2: No recovery was created by replacing private debt with public.
It didn't create inflation, either. Neither the money increase nor the government debt increase created inflation.
Those changes created neither the raging inflation that many people warn of, nor the "bit" of inflation many see as a way to "erode" debt.
|Graph #5: Inflation in Japan (Source: Trading Economics)|
Lesson 3: There was little or no "erosion" of debt by inflation.
Lesson 4: Try debt forgiveness.