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Sinking Feeling

Is the once-unstoppable U.S. economy following Japan's into the depths?

This story appears in the November 2002 issue of Entrepreneur. Subscribe »

The similarities are eerie. In 1990, the United States envied Japan. After decades of rapid economic expansion, the Nikkei average of Japanese stocks reached a new high of 38,915 on New Year's Eve 1989. Japanese real estate had appreciated so much during the 1980s that, at one point, the city of Tokyo was said to be worth more than the state of California. Japanese companies were thrashing U.S. rivals in semiconductors, automobiles, consumer electronics and other industries, while cash-rich Japanese investors purchased American icons like Rockefeller Center and the Pebble Beach golf course. Japanese business was held up as a model to the world, and readers snapped up tomes on Japanese management practices.

The year 1990 marked the end of Japan's ascendancy. Over the next two years, the Nikkei plummeted 60 percent. Real estate values were cut in half by 1996. The long-booming economy entered equally persistent recession and stagnation. A decade later, Japan's situation has changed little, with few prospects for the country or its style of business returning to dominance soon, if ever.

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