For US Economy Japan Is the ‘Canary in the Coal Mine’

While investors and keen watchers of the U.S. economy wait with bated breath to learn whether and how much the Federal Reserve might cut interest rates following its upcoming meeting, an ocean away, another vital meeting centered on raising interest rates could have significant ramifications to not only the U.S. but global economy as well.

In the corridors of economic history, Japan has often been viewed as a cautionary example of what happens when a developed economy succumbs to long-term stagnation. While many policymakers have dismissed Japan’s “Lost Decades” as a unique case, the reality is more alarming. Japan’s persistent slow growth, driven by mounting debt and external pressures, mirrors trends in the United States.

Though Japan’s GDP is only a fraction of America’s, the economic paths of the two nations are growing eerily similar. As such, it’s time to stop seeing Japan as an anomaly and instead heed the warning of a looming crisis if fiscal responsibility isn’t restored.