US Risks Following Japan's Example Of Stagnancy

TOM RAUM

WASHINGTON (AP) — Heavy government stimulus spending and near-zero interest rates did little to end a "lost decade" of stagnation and mushrooming debt in Japan. Some economists and lawmakers say the U.S. may wind up following the same trajectory.

Despite early signs of recovery and a strong U.S. stock market rally, fears persist that the failure to generate new jobs or ignite more consumer spending could drag the economy back into recession, or result in a protracted Japan-like period of poor economic and stock-market performance.

Japan is President Barack Obama's first stop on a tour of Asia beginning Friday — and the gloomy world economy will be high on the agenda. Both Japan, beginning in the 1990s, and the U.S., in the most recent economic crisis, had credit and housing bubbles and both engaged in huge amounts of overborrowing leading up to sharp economic downturns. And both used historically low interest rates and government stimulus spending to try to lift their economies out of the ditch — with questionable results in Japan.

"It seems to me we are on the exact same path that the Japanese took in their 'lost decade' — of running up huge government debts, of not stimulating growth and at the end of the decade having this massive debt," said Kansas Sen. Sam Brownback, senior Republican on Congress' Joint Economic Committee.