By the time the bombing stopped and the smoke cleared, Japan's total economic losses from World War II amounted to the equivalent of about one year's national output. That tally included everything that could have a price put upon it--the factories and the flame-throwers, the homes and the howitzers, the silos and the submarines. In modern values, the bill was 19.5 trillion yen or some 140 billion dollars.
The bursting of Japan's "bubble economy" in 1990 started another extraordinary episode of wealth destruction. The war, of course, was incomparably more costly in human terms. But Japan's 1990s peacetime disaster of deflation has been vastly more expensive in an economic reckoning. Within five years--from 1990 to 1995--a period comparable to the length of the Pacific War, the collapse of land values and stock prices had inflicted losses equal to nearly two years' national output. The money value of these losses was 827 trillion yen or about 6 trillion dollars. It takes Uncle Sam four years to collect this much in taxes and it takes the Russian economy fifteen years to generate this much wealth. And Japan's losses are still mounting as land and stock prices continue their long downward trajectory.
The nature of the experiences differs. The wartime damage was chiefly physical, the peacetime losses financial. But the comparison brings into perspective the enormity of Japan's self-inflicted economic disaster, one more costly than losing a major war. And it raises the question: can Japan bounce back this time? A growing body of expert opinion says no.
