Japan: The Simulus That Didn't Work

The New York Times reports:

In total, Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, according to the Cabinet Office. The spending peaked in 1995 and remained high until the early 2000s, when it was cut amid growing concerns about ballooning budget deficits. More recently, the governing Liberal Democratic Party has increased spending again to revive the economy and the party’s own flagging popularity.

In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations.

The Times says that in Japan both average citizens and experts believe that nation's attempt to spend its way out of recession was a failure. Unforutunately, it also reports that the people advising Barack Obama draw a different conclusion: that it didn't work because the Japanese didn't spend enough.

Here's a Wall Street Journal editorial on the Japanese experience.