Morgan Stanley

Interesting comparison between Japan and U.S. recessions
from Morgan Stanley
Morgan Stanley: "America is not Japan. Market structures of the two economies are different, as are the two financial systems. But both economies have had to cope with the aftershocks of a major asset bubble. And there are similarities to the time profile and mix of the two post-bubble shakeouts. Both economies initially experienced capital-spending-led recessions and consumer resilience. That resilience crumbled in Japan but has yet to do so in the United States. But pressures are building on the saving-short, overly indebted, job- and income-constrained, and wealth-dependent American consumer. The coming normalization of US interest rates could well be the catalyst that takes the US economy into the next phase of its post-bubble adjustment. Financial markets are priced for ongoing resilience of the American consumer. Should that not turn out to be the case, the dollar would undoubtedly fall further and the US bond market could stage a Japanese-style rally. It is far too soon, in my view, to dismiss the lessons of Japan.