Paul Krugman thinks Japanese economy has done well

An interesting interview in the Weekend FT with Nobel prize-winning economist Paul Krugman. It’s pretty wide-ranging, but in passing he compliments Japan on the success of its economic policy, saying “When people ask: might we become Japan? I say: I wish we could become Japan.”

He doesn’t give much detail, and his statement may seem counterintuitive to many people, but he notes that “they managed to keep per capita income growing through most of what we call their ‘lost decade’.” In effect, he’s agreeing with the case put so convincingly by Bank of Japan Governor Shirakawa in his speech at the LSE in January. Dealing with burst bubbles and bank crises is hard, as the rest of the world has been finding out in recent years. Japan has actually managed the fall-out relatively well. The underlying situation is distorted by Japan’s low (and now negative) population growth, which dampens GDP. But what really counts is not GDP but per capita GDP – or indeed per capita consumption as Governor Shirakawa argued. On that measure, Japan has done as well as other developed countries, despite all the negative press.