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21 Sep 08
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Indeed, television news gives the current upheaval, known here as “Lehman Shock,” less coverage than more domestic issues like an approaching typhoon and a scandal over tainted rice. Even in the race for prime minister, the financial crisis has emerged as just one of a dozen issues and usually not the top one.
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“The financial crisis looks like fire on a distant shore,” said Atsushi Nakajima, chief economist at the research arm of Mizuho Financial Group. “Japan has remained very calm and peaceful.”
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“Japan learned its lesson in the 1990s,” said Akio Makabe, an economics professor at Shinshu University. “It was wise when Wall Street was foolish.”
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The country sits on a $14 trillion pile of household savings, the product of decades of trade surpluses and frugal lifestyles. This has allowed Japan to finance its immense $8.1 trillion fiscal deficit and still have enough money left over to be the world’s largest creditor nation for the last 17 years.
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That means that Japan’s domestic economy has been largely insulated from global credit market turmoil because it does not borrow from those markets. At the same time, with so much money flowing out — usually into safer investments like Treasuries — stability in the United States clearly matters.
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This blessing has also been a curse to investors, say economists. Its wealth shields Japan from pressures to meet global standards of growth or corporate profitability. This is what allowed the nation to accept near zero growth rates in the 1990s and what permits the survival of Japanese corporate practices like valuing employees and clients over shareholders.
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