Prepare for a Japanese-style lost decade

Zombie banks and high unemployment look set to curse our economy as they did Japan’s, say Fraser Nelson and Mark Bathgate. A Conservative government could avoid disaster, but only if it is prepared to face the painful reality

To say a country is turning Japanese has a very special meaning to economists. It means entering recession and never properly escaping it. It means entering a world of zombie banks that are being kept alive by taxpayers’ money. It means year after year of huge government deficits: profligacy masked as Keynesian medicine. It means year after year of false dawns, high unemployment and lapses back into recession. It is an acute form of economic purgatory — and one which Britain might well be facing.

There are plenty of parallels for those with an eye to see them. Japan’s ‘lost decade’ followed a debt-fuelled boom, a mirage which politicians vainly mistook for prosperity. Once the bubble burst, the government entered denial and kept spending — thinking the deficits would somehow incubate a recovery.