CITIZENS OF THE USA SHOULD BE A LOT WEALTHIER THAN THOSE IN JAPAN....BUT WE AREN'T....WHY?

I have roots in Japan.  I was born in Hawaii and only speak English, but have been to Japan a lot.  

• I know the people there and have been everywhere in the country.  
• There is a kind of affluence that seems real.

• 
  I feel safer in Japan than the USA.
• The whole country is clean.
• But this should not be for at least two reasons:
• The Great Tohoku earthquake, tsunami and nuclear cataclysm cost around $300 billion, and they await that coming $1 trillion megaquake.

• The Nikkei 225 was around Y45,000 35 years ago, and remains about the same today.
• The Dow Jones Industrial average closed at $2,634 on 31December 1990 and is around 46,312 today.

The Japan Nikkei 225 hit a record high this week with the Fed Reserve rate cut, closing at 45,303 Yen.  Never in history had the Nikkei hit Y45,000 until this month.  The yen, by the way, is 147.6 to the dollar, and that, too, explains the feeling of what one can afford when visiting Japan.

Likewise, the U.S. stock market again hit a record high yesterday.

The Dow Jones Industrial Average rose 124.10 points, or 0.27%, to 46,142.42, the S&P 500 gained 31.61 points, or 0.48%, to 6,631.96 and the Nasdaq Composite  gained 209.40 points, or 0.94%, to 22,470.73.

But what has been happening in Japan is totally different from the U.S.  I've been watching the Nikkei since it hit 38,915 on December 20, 1989.  

• The Nikkei ended a fantastic run, rising over 16% per annum between May 1949 when the Tokyo Stock Exchange reopened and December 1989. However, 38,915 was the peak for the next thirty-five years. The Average plunged after December 1989, declining to 7162.9 by October 27, 2008, an 81% decline. 
• You can compare the 1989 Japanese stock market bubble to the 1929 bubble in the United States.  The Dow Jones Industrial Average peaked at 377.60 on September 7, 1929.  It then plunged over 86%, hitting a low of 41.22 on July 8, 1932.

• 
  When the Nikkei 225 hit 38,915 in 1989, the Japanese stock market was the largest in the world. Today, the Japanese stock market at $6 trillion is about 12% of the size of the US stock market.  It is now #4.
• ASTONISHINGLY, BETWEEN 1990 AND 2025, THE DOW JONES INDUSTRIAL AVERAGE OUTPERFORMED THE NIKKEI 225 BY A FACTOR OF 15.
• On 4March 2025, the Nikkei finally broke through the 40,000 mark for the first time in history.

• 
  Is the Nikkei 225 headed for 50,000?  Maybe. Although the Japanese stock market has grown at 14% per annum since 2011, and it would only take two years to reach 50,000 at a 14% growth rate, both GDP growth and inflation have been anemic. GDP and inflation have grown at less than 1% since 2000 and there is no anticipation that growth will pick up soon.  It seems unlikely that the stock market will continue to grow at such a rapid pace in the near future, but at least the Japanese stock market has returned to its old all-time high after thirty-five years and broken through an important benchmark.

• 
  In other words, say you invested $1000 in the Nikkei in 1990 (using info from Google's AI Overview):
• It would be worth $420 today.
• If you had placed $1000 in a U.S. bank savings account, it would be worth somewhere between $2000 and $3000.
• A thousand dollars in a U.S. through inflation would be the equivalent of $2470 today.

• 
  The U.S. stock market, as represented by the S&P 500, has grown substantially from 1990 to 2025, with a hypothetical $1000 investment at the start of 1990 yielding approximately $38,026 by the end of 2025, representing a total return of about 3,702.59% with reinvested dividends. This amounts to an average annual return of around 10.77% before adjusting for inflation.
• 
  Some comparisons of wealth.
• Clearly, on a country comparison basis, the USA is now much wealthier.
• But much of this wealth belongs to the rich.  In the U.S., 1% of the richest own more wealth than the bottom 90%.  
• The obvious one is that $1000 invested in Japan would be worth $420 today and $38,026 in the USA.
• There is the super  rich in Japan, too, but Japan has a larger and more robut middle class, as well as a historically more egalitarian income distribution.

• 
  From Forbes:

As per the Organisation for Economic Cooperation and Development's (OECD) Better Life Index, Japan's average household net-adjusted disposable income per capita is $28,872 a year, which is a little lower than the OECD average of its 38 OECD member countries, $30,490 a year.  As a comparison, this figure is $51,147 a year in the U.S. and $16,269 in Mexico.

• 
  Under these condition, people in the U.S. should be a lot more affluent than citizens of Japan.  But I asked Google AI Overview, and the response was:

Despite the massive growth in the U.S. stock market compared to Japan's Nikkei index over 35 years, the U.S. is not dramatically more affluent due to a range of complex factors

. These include differences in population growth, GDP per capita growth, corporate structures, and household savings habits. While the U.S. has experienced faster GDP per capita growth, the gap is narrower than stock market performance might suggest. 

As you might have difficulty getting to this information, here are more details.

AI Overview

Despite the massive growth in the U.S. stock market compared to Japan's Nikkei index over 35 years, the U.S. is not dramatically more affluent due to a range of complex factors

. These include differences in population growth, GDP per capita growth, corporate structures, and household savings habits. While the U.S. has experienced faster GDP per capita growth, the gap is narrower than stock market performance might suggest. 

The U.S. and Japan have different economic growth patterns

While the U.S. stock market has soared, Japanese stocks remained near their 1989 highs until recently. However, a country's stock market performance does not fully reflect its overall affluence. 

• Population growth: Japan's population has been shrinking, while the U.S. population has grown significantly due to a higher birth rate and immigration. This means that a portion of the U.S.'s total GDP growth has been absorbed by population expansion.
• GDP per capita: Real GDP per capita, a better measure of individual economic well-being, grew more slowly in the U.S. compared to Japan than a comparison of headline stock market figures might suggest. Since 1989, U.S. real GDP per capita has grown by 70%, while Japan's grew by 41%. As of 2025, U.S. nominal GDP per capita was significantly higher ($84,648) than Japan's ($34,800), reflecting a wider gap in living standards that has opened since the 1990s. 

Differences in savings and investments

How citizens save and invest their money plays a significant role in overall household wealth, and Japanese and American habits differ substantially.

• Japanese household financial assets: A large portion of Japanese household wealth is held in cash and low-yield deposits rather than riskier assets like stocks. Decades of low to negative inflation and the memory of the 1980s asset bubble collapse have made many Japanese households extremely risk-averse.
• American household financial assets: In contrast, Americans tend to hold a much higher percentage of their financial assets in the stock market. This difference means that while U.S. households benefited greatly from the soaring stock market, Japanese households, in general, did not. 

Impact of corporate culture and efficiency

Economic policies and corporate governance also contribute to the divergence.

• Stagnant services sector: For decades, Japan's services sector, which accounts for a large portion of the economy, has been less dynamic than its U.S. counterpart due to heavy regulation and protection of small businesses. In contrast, American productivity was boosted by the rise of efficient retail giants and the internet boom.
• Corporate structure and innovation: During Japan's stock market stagnation, corporations were largely owned by other corporations, creating a system with little accountability to outside shareholders. This structure stifled innovation and propped up inefficient "zombie companies". Meanwhile, American firms dominated the internet and software industries, which drove significant economic growth. 

Income inequality and the "wealth effect"

While stock market gains can increase affluence, the distribution of that wealth varies.

• Inequality in the U.S.: The benefits of the booming U.S. stock market have been concentrated among a smaller percentage of the population. The U.S. has one of the most unequal income distributions among developed countries, and rising stock prices contribute to this disparity.
• The "wealth effect": Increased stock market wealth in the U.S. can boost consumer spending, which in turn fuels economic activity and household income. However, since wealth is not distributed equally, this effect is heavily skewed toward higher-income households.
• Lower inequality in Japan: While inequality is on the rise in Japan, it remains more modest than in the U.S.. This reflects a larger middle class and less dramatic disparities in wealth and income. 

In short, the performance of a stock market is not a perfect proxy for national affluence. Japan's economic growth has been moderated by population decline and cultural investment habits, while the benefits of the U.S. market's exceptional returns have been concentrated among those with significant equity investments. 

I read all that, but still cannot quite understand why Japan continues to do so well.  I still rather live in Honolulu than Japan, but I also rather live here than anywhere else in the USA.  I find many cities in the U.S. dangerous, and with Donald Trump as president, fear about the future of Democracy.  Maybe it's just me lucky to live in Hawaii.

I'll close with Bob Sigall and the San Diego Chicken, his Rearview Mirror contribution today in the Honolulu Star-Advertiser.  Just more bragging for Hawaii.

• 
  Hawaii has less than one-half of 1% of the U.S. population and land mass. Yet I seem to continually find that islanders have made an oversize impact around the world.  One example of that is a young man who was born in Honolulu in 1937. His name was Ron Jacobs.
• Indicated in a Midweek article much later as a red-headed Jewish kid, he went on in 1970 with Tom Moffat, Fred Kiemel (was my high school classmate) and others become the Poi Boys, changing the radio landscape of Hawaii forever.

• 
  Jacobs went on to in that year team with Casey Kasem and Tom Rounds to found American Top 40.  This program continues to live, now hosted by Ryan Seacrest.
• So anyway, Jacobs and associates originated in 1974 the San Diego Chicken, played by Ted Giannoulas.  More than 50 years later, Ted still now and then dons the outfit and performs for the San Diego Padres baseball team and other events.

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