Markets: U.S. vs Japan

" 35 minutes ago Japan's finance and economic minister. And -- his government will do what ever it takes to keep the economy afloat. Include issuing more bonds to fund stimulus measures that Japan's Nikkei 225 -- Closed at a ranch 26 year low and is down almost. 26 and a half percent or down isn't right just about half percent this morning the Nikkei as we mentioned it down though as much as 20% year -- is taken a dramatic fall. The last decades of some cold. So called experts warn that -- the Dallas lost more than half its value over the past sixteen months Japan could serve as a cautionary tale. Here -- people look for a come back in the United States with a closer look at these two economies I'm joined by. Dick hi L Bushey -- the Pacific economic cooperation -- international economic relations. At the University of California San Diego and Peter Landers is The Wall Street Journal the Washington DC's assistant bureau chief good morning good to see guys. Good morning -- act to Kyle start with you let's look through some of the similarities. Of the past between. The Japanese and the US economy -- this of course is dating back. Back to the ninety's but explained why there are some similarities."

" Okay. -- economies that some of in two aspects not the east one more thing economic conditions. And also the ploy played coat -- policy responses to the economic problems. Today in both places the problems started with that -- saw about that -- its stock prices that prices and housing crisis. And their response to policy response to that problem. In both countries many messes I've been used might -- expense and fiscal stimulus and also financial regulation though it was on speaking terms of -- having a -- Has been very similar in both countries in both countries. The government started with the idea about buying toxic Dotson thought troubled outfits and eventually moved on to that -- going -- And more more outgoing -- India."

" Peter you only have -- you were in Japan between that period of the early 1990s. And the early 2000 Peary you solve the fiscal stimulus package is. The capital injections what was happening there how is that in some ways eerily reminiscent of what we're experiencing right now."

" One thing that's eerily reminiscent as the way that people thought the Japanese government debt would not get out of hand I remember. People saying well Japan has no Italy certainly. Japanese the Japanese fiscal situation is much more solid and Japan's finance ministry can be trusted to do a better job than for example the Italian finance ministry that was in the mid 1990s and then things. Just got worse and worse than the debt as a relation to GDP. Grew way beyond a 100% now maybe around 200%. And so I hear some similar situations here in the United States where people say well our our -- is still relatively well but it could get higher. Very quickly over time."

" You know -- to private -- a couple of key things we need to -- to clarify your number one. Property prices between 1985. In 1991 in Japan they tripled. So in many respects the housing boom in their four bust is very similar. But in that the Federal Reserve Bank here he's been very quick to cut interest rates -- don't receive there they were much slower to do that. Do you think that some things we're doing here in the last. Our as a result of perhaps learning from what didn't work in Japan in the nineties."

" I think so that policymakers in Sierra especially the failures of I've been -- from the Japanese experience and that that's lie. Is. Let's cut -- misstate the very aggressively. But I guess that result was. Unfortunately similar to what happened in Japan. That those. -- cut interest rates aggressively to avoid the viewing Thursday that even so you -- the beat the viewing this straight here and that happened in Japan to."

" You -- I think -- kind of because you have companies like new Muir or Mitsubishi. Investing in some of our larger financial institutions for example Morgan Stanley just to give people some sense of reference here. What does that tell you why would they invest in our financial institutions if they and back see some similarities. To what happened to them in the nineties."

" Well what wasn't that tells us is that that Japanese financial used to send major ones that got no mood and that Tokyo Mitsubishi. I actually recovered from last financial crisis about ten years that those those days that recovery started around 20032004. And they didn't take not a risk in Valdosta -- units so bearing the good position. To take some risk here. So what what what that that tells us. Is that they have the cash. Outside the United States waiting to come into the US financial system when that things could get better."

" A pizza peel back to something you need to get the very beginning and that is right now the debt to GDP in Japan could be north of 200%. You know predictions I believe from the higher math is that the US could be as high as 90%. Here's my question number one how dangerous is that a number killed. If you -- the place that we go to to fund our debt and very dire straits. Can only continue to rely on that."

" I think he'll be difficult for the US to NA. Borrow from foreign countries it just and on and without some way of restoring our fiscal health over the long term and that's the that's the key -- Japan. Thought it could jolt the economy back to health. In the 1990s with the stimulus packages and by lowering interest rates to zero and it just didn't work the economy remains so dependent on exports. To the United States and now exports are down 50% year on year so they never developed a self sustaining recovery. And I think that's where we need to learn that lesson that negative lessons if you will. And use our moment now to get the economy back on a self sustaining path where the where the growth continues. -- for many years and then we can avoid a budget deficit and a and a fiscal situation that is really dire."

" Aren't let's look at Peter -- is listening at the -- land there isn't it -- she gentlemen thank you very much good having you on with us this morning."