A review of Japan's inflation in the late 80s and early 90s, the stock market and housing bubble
If an item is more expensive, there are sometimes more people who buy it: for example, the higher it is in the stock market, the more people seem to be willing to buy it, so it appears that one's assets will increase in value; the more expensive the house, the more expensive it is, and if people also flock to buy it, it seems that assets are also adding value. However, as in the situation above, it is easy to form an economic bubble.
1985/9,capitalismThe five major economic powers (USA、Japan、West Germany、UKwithFrance) AtNew YorkPlaza HotelAchieved”Plaza Accord”. At the timeUSDExchange rateToo high and caused a large amounttrade deficitAs a result, the troubled United States and the other four countries issued a joint statement announcing interventionExchange rateMarket. ThereafterYenIt rapidly appreciated, and the exchange rate at the time went from 1USDIt rose to around 240 yen to 120 yen to 1 US dollar a year later. Due to drastic changes in the exchange rate, the United StatesTreasury bondsThere was a book loss on the constituent assets, so a large amount of money was needed to avoidExchange rate riskThen it entered the Japanese domestic market. At that time, the Japanese government began implementing it to subsidize export industries that were hit by the appreciation of the yenquantitative easingpolicy, on the marketinterest rateIt declined, and as a result, excess working capital was generated.
The Japanese stock market actually had too much hot money, so many people invested their money in the stock market, causing the stock market to skyrocket: in 1989, that is, 4 years after Japan's Plaza Agreement was signed, Japan's Nikkei index rose to 39,857 points, but in 1985, four years ago, the Japanese stock market index was less than 10,000 points. In other words, within 4 years, the Japanese stock market rose to 400% of its original value.
Other than that, it's real estate in Japan. Japan is a country with few people. Everyone wants to go to big cities like Tokyo and Osaka, and everyone is frantically buying land. The average land price is probably up 400% compared to a few years ago.
The combination of these factors has led to a speculative boom in Japan, particularly in the stock exchange market and the land exchange market. Influenced by the so-called “land will not depreciate” land myth, the volume of land transactions for the purpose of resale increased, and land prices began to rise. At the timeTokyoThe sum of land prices in the 23 districts has even reached a level where all of the land in the United States can be purchased, while banks use continuously appreciating land as collateral to lend large amounts of money to debtors. This rise in foreign prices also increased landowners' book assets and stimulated the desire to spend, which led to an increase in domestic consumer demand.
Under the double stimulus of real estate and the stock market, all Japanese feel that they are very rich; people feel that Japan has the highest level of technology in the world, and that the most developed one is also the richest, so it stimulates people's consumption. The Japanese go to luxury stores all over the world to frantically shop for goods.
However, we need to know that whether it's the stock market or the housing market, once prices get too high, one day they will collapse.
We have to talk about the bursting of this bubble. The governor of the Bank of Japan at the time was Yasushi Mieno. When the Japanese economic bubble appeared before, he sensed keenly that he had been asking the central bank of Japan to raise interest rates, but no one paid attention to him at the time. Later, he became the governor of the central bank himself, so he began implementing his own policies. His first policy was to raise interest rates over the period from 1989 to 1992. Naturally, there were fewer people on loans when interest rates were high; banks wanted to take the money back; they took the money and traded natural stocks; the bank wanted to take the money back; the money then traded natural stocks From The stock market was withdrawn, and the stock market fell as a result: in 3 years, the stock market fell 50%, and the trading volume was reduced by 90%;
Since then, the Japanese stock market has entered a 20-year bear market, ah, when it was at its lowest point, it fell to over 7,000 points to less than 1/5 of what it was. Until today, it is actually still far from this high point;
Houses are still lagging behind in comparison to the stock market: policies were already in place in 1991, and housing prices were still rising; Yasushi Mieno continued to make aggressive moves. In 1992, Japan introduced a real estate tax, the so-called real estate tax and powerful drugs that restricted land financing, and housing prices fell in response. Housing prices in Tokyo soon fell to 1/4 of their original level until today. Many people who bought houses returned this house to this bank and declared bankruptcy because they were insolvent.
We can draw a lot from the story of Japan's economic bubble:
For example, the Plaza Accord signed between the US and Japan was actually just one of the triggers; what actually caused the bubble and collapse of the Japanese economy was their wrong monetary policy: implementing a loose monetary policy at an inappropriate time caused Japan's currency to flood; at the same time, it was also too rude in the process of bursting the bubble. The Japanese economy was damaged immensely by the hard landing.
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