Considering it affected a country's society so greatly, I wonder if there has been any discussion into whether or not it was inevitable. What went wrong with Japan in 1985? And was this a freak event or something that was likely going to happen given some specific factors?
What was the fundamental reason behind Japan's 1990s asset price bubble?
byu/roon_bismarck inAskEconomics
Posted by roon_bismarck
1 Comment
When it ends up being a bubble, the precise problem is that there was no fundamental reason. Japan had been growing rapidly, if it had continued to grow rapidly that would have supported much of the “overvaluation”. Instead, it didn’t continue to grow rapidly. And instead it has been in a real slog ever since, which as far as I understand, it is still a fundamental questions for the macros as to what has been the precise problem the last 30-40 years.
Sometimes we can know better
The bubble thing happened in Houston 2010-2014. During that period Houston was the only western (here read safe place to invest) economy that was growing (do to high oil prices and the fraccing revolution) and an absolute metric-ton of investment that needed to be “safe” (read Canadian insurance company investment, for some reason) and needed a return just flooded into Houston commercial real estate. By mid-2014 we were building approximately 8 years worth of absorption of office space (after 2 previous years of relatively high deliveries) and the bust hit.
I forecast at the time that it would be 8 years before we built another office building. I was also yelling at everyone for building that much, which was clearly overbuilding. But that assumption was based on continued baseline growth in Houston, which was a good call (and what we were missing in Japan). I ended up being wrong in 2 ways
1. There was some building, the office market had a flight to quality aspect. So we did see a few trophy AAA buildings built in ultra-prime (or underserved) locations.
2. COVID happened.