TOKYO

“Japan’s problems now are the same as they were in the 1990s, when you were writing about them. It’s depressing.” So declared one economist I spoke to here. “But the Japanese don’t seem all that depressed,” objected another. Both were right  and the conversation crystallized some thoughts I’ve been having about Japan’s situation, and ours.

A decade ago, Japan was a byword for failed economic policies: years after its real estate bubble burst, it was still suffering from chronic deflation and slow growth. Then America had its own bubble, bust and crisis. And these days, Japan’s record doesn’t look that bad to an American eye.

Why not? For all its flaws, Japanese policy limited and contained the damage from a financial bust. And the question in America now is whether we’ll do the same  or whether we will take a hard right turn into economic disaster.

In the 1990s, Japan conducted a dress rehearsal for the crisis that struck much of the world in 2008. Runaway banks fueled a bubble in land prices; when the bubble burst, these banks were severely weakened, as were the balance sheets of everyone who had borrowed in the belief that land prices would stay high. The result was protracted economic weakness.