To be sure, there are several major differences between Japan in the 1980's and the United States today. One is the fact that property prices rose much faster and more steeply in Japan, partly because speculators used paper profits from a booming stock market to invest in property, insupportably leveraging the prices of both higher and higher.
Another difference is that the biggest speculators in Japan's frenzy were deep-pocketed corporations, and they pumped up the commercial property market at the same time that home prices were inflating.
Then came the crashes in both stocks and property, after the Japanese central bank moved too aggressively to raise interest rates. Both markets spiraled downward as investors sold stocks to cover losses in the land market, and vice versa, plunging prices into a 14-year trough, from which they are only now starting to recover.
Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.
As a result, Japan's property market in the 1980's was much more fragile than America's today, Professor Noguchi said. And when the market fell, it fell hard. Because of all the corporate speculation, the collapse wiped out company balance sheets, crippled the nation's banks and gave the overall economy a blow to the chin.
Since 1991, Japan has spent 11 years sliding in and out of recession. It is only now showing meaningful signs of recovering, with the World Bank forecasting that Japan's economy will grow by a solid 2.2 percent this year
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