The sun still rises in Japan's economy

Japanese technology on display at Tokyo's Miraikan museum. Photo / Bloomberg

Lunch at Tokyo's Foreign Correspondents' Club (FCC) is much like lunch at any such club in any of the world's big cities.

The food, like the decor, is plain but classy, with an international flavour. But the menu has one feature you'd be unlikely to see anywhere outside Japan: its prices, it boasts, have not changed since 1983.

For almost any foreigner, it's difficult to imagine what it must be like for a restaurant meal to cost the same now as it did 26 years ago. But for the locals, the answer is straightforward: "If you think it seems expensive now, boy you should have been here in the 80s".

The FCC is a regular haunt of Meishi Sonobe, a former vice-president of Mobil Oil in Japan who these days dabbles in a variety of business interests, including used car exports.

A charming and laidback fellow, Sonobe has recently accepted an appointment by New Zealand Trade & Enterprise to act as a conduit for Kiwi entrepreneurs trying to break into the Japanese market, through NZTE's Beachhead initiative.

While he is optimistic about the potential for increased trade between New Zealand and Japan, he is also realistic about the economic pickle Japan has found itself in.

In the late 80s, he notes, his mother's apartment in Tokyo was estimated to be worth around US$6 million. After the bubble burst in 1990, its value plummeted to just US$750,000, and has only slightly improved since then.

While the West is heaving an enormous sigh of relief that our own economic tsunami has not yet proved as bad as was feared, many Japanese remain sceptical about a global economic recovery. They, too, kept thinking the sunshine would break through the clouds any day, but nearly two decades on the sunblock remains on the shelf.

"At that time, about 25 years ago, the Nikkei was around the 7000 to 8000 level, and US Dow was 3500," Sonobe recalls. "Now, the Nikkei is back to [almost] that level again, but the Dow is still much higher. When you think the US has created that bubble over the last 8-10 years, the Dow could still more than halve."

The point has not been entirely lost on the United States, nor Europe for that matter, where sceptics have been fretting for a while about whether the rest of us could follow Japan's deflationary path.

Japan dealt with the bursting of its bubble by pumping trillions into its economy, but let bank debt roll over and over. Despite price wars, consumer spending has never fully recovered, and some critics say the US is making the same mistake.

The OECD's chief economist, Jorgen Elmeskov, insists Japan's situation is unique.