Japan: a warning from history

Austin_Allegro

We often read on these pages fears that the 'lost decade' of the Japanese slump in the 90s could be what awaits us.

But how badly were the Japanese actually affected? I don't recall starvation, riots etc...although I do remember seeing a news item about a 'cardboard city' for businessmen out of work.

Was there even mass unemployment?

I know our situation is different - we do not have the social discipline or cultural cohesion of the Japanese so things are likely to be worse here - but I'd pick Japan over Zimbabwe anyday...

GucciMane

Even the poorest Jap's had savings back then.

penguine

Someone once posted on this board about young Japanese couples on good incomes who bought flats near the top of the boom. They were still living in them a decade later and raising their family in cramped conditions because they couldn't afford to move.

Pretty easy to see that happening in the UK.

Dan:_4

penguine wrote: »

Someone once posted on this board about young Japanese couples on good incomes who bought flats near the top of the boom. They were still living in them a decade later and raising their family in cramped conditions because they couldn't afford to move.

Pretty easy to see that happening in the UK.

I'ld just give up and leave, rather then raise a family in those cramped conditions.

penguine

Dan: wrote: »

I'ld just give up and leave, rather then raise a family in those cramped conditions.

But where would you go? If you don't have money or a family connection to a particular country, it's difficult to emigrate.

themanbearpig

Dan: wrote: »

I'ld just give up and leave, rather then raise a family in those cramped conditions.

But what about your debt?

Its pretty difficult to emmigrate if you have declear bankruptcy.
There is a chance that a Japan type scenario may unfold in central London, where lots of people of 'breeding' age will be stuck in small studios/1 bed flats, which will be worth a fraction of what they owe if the crash is long and deep. Not very nice if you bought a flat in your early 30s, and are stuck there until your mid 40s!

Dan:_4

Sorry, I meant I would just let it get repo'ed and rent somewhere bigger.

Dan:_4

Anyway, I can't see the crash being deep enough or lasting long enough to worry about this. You can have 1 kid in a 1 bed for up to a year without too much trouble. Back in the 90s some banks would offer special NE mortgages to help people trade up - and I would expect the same thing to happen again. If all else fails and you really need the extra space then you could rent out the flat while you privately rent a larger place until you are in a position to get shot of the flat.

lostinrates

Dan: wrote: »

Anyway, I can't see the crash being deep enough or lasting long enough to worry about this. You can have 1 kid in a 1 bed for up to a year without too much trouble. Back in the 90s some banks would offer special NE mortgages to help people trade up - and I would expect the same thing to happen again. If all else fails and you really need the extra space then you could rent out the flat while you privately rent a larger place until you are in a position to get shot of the flat.

If you already have a one bed...or ..althugh I'm shuddering, a studio, you could raise a small child there. It good be cosy and loving for all its cramped ness, and the world wouldn't end, I agree. But the risk of that has been why many think its unwise for young people to not get any future proofing in a property. A one bed is a wee bit more furture proof than a studio...how ever much you might love a new partner sometimes its nice to be in a different room other than the bathroom.

A two bed, even if the second room is a small study, can give people a lodger's income, then later a cot room, or if need be a room with a small bunk bed in it.

I agree, letting to rent might be an option if your mortagee will allow it and the rent coveres your mortgage (not always likel if you have a large debt on the property, or no equity) and even worse if you are one of the last in first out minority who will lose their job. But if you've biught within reasonable affordabilty, maybe taken insurance against risk, and even better, have a little room to grow...I agree there not much nbeed to panic. But then again, how many FTB over the last few years have bought their studio/one beds with one bean and a loan, especially where costs are very high and flats with room to grow are further out of reach? Evrn if a very small minority, IMO its suffering that shoukd have been even more limited.

baileysbattlebus

Austin_Allegro wrote: »

We often read on these pages fears that the 'lost decade' of the Japanese slump in the 90s could be what awaits us.

But how badly were the Japanese actually affected? I don't recall starvation, riots etc...although I do remember seeing a news item about a 'cardboard city' for businessmen out of work.

Was there even mass unemployment?

I know our situation is different - we do not have the social discipline or cultural cohesion of the Japanese so things are likely to be worse here - but I'd pick Japan over Zimbabwe anyday...

Japan had "lifetime employment" in large corporations for very many years, unemployment rates in Japan from 1992 to 2008 were these.
1992 01 472·2
1993 01 972·5
1994 01 562.9
1995 01 163.2
1996 01 303·4
1997 01 3.4
1998 01 504.1
1999 01 204.7
2000 01 284·8
2001 01 445.1
2002 01 605.4
2003 01 535.3
2004 01 754.8
2005 01 634.5
2006 01 834.2
2007 01 933·9
2008 01 4.0

In Japan first of all they cut overtime and then they cut wages - but generally kept people employed. The jobs that disappeared were entry level jobs for new graduates and a lot of over 55's took early retirement - retirement age was 60 at the time.

Large scale unemployment caused by laying off workers was politcally and socially unacceptable in Japan.

The "lost decade" began to change some of the rigidity in the Japanese labour market.

Thrugelmir

Austin_Allegro wrote: »

We often read on these pages fears that the 'lost decade' of the Japanese slump in the 90s could be what awaits us.

But how badly were the Japanese actually affected? I don't recall starvation, riots etc...although I do remember seeing a news item about a 'cardboard city' for businessmen out of work.

Was there even mass unemployment?

I know our situation is different - we do not have the social discipline or cultural cohesion of the Japanese so things are likely to be worse here - but I'd pick Japan over Zimbabwe anyday...

The property bubble in Japan was of a totally different nature. Prices in prime Tokyo locations reached levels that make our recent property peaks look insignificant. One issue was that the banks continued to lend after the bubble had burst, little of the money was ever repaid.

Another issue was that Japanese banks held equity stakes in Companies they lent to. As the Nikkei rose , the value of the security rose , and the banks lent more.

The Government of the day made mistakes which prolonged the recession and created the "lost decade". The main one being the raising of interest rates to pop the property bubble. Something fortunately we haven't had to endure.