Comment on Prof. Miyao

David J. Littleboy (Tokyo, Japan)

This comment originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on May 9, 2003: posted here with the author's permission.

In his commentary (http://www.glocom.org/debates/20030512_miyao_more/), Prof. Miyao wrote:

"In my view, misguided policies in the early 1990s lead to the complete collapse of asset values in Japan. I don't deny the existence of a 'bubble' in the stock and land markets in Japan in the late 1980s, but the adjustment of the bubble in the market could only partially explain such a big drop in asset values in the early 1990s."

It appears to me that both stocks (as seen by PER) and real estate/housing prices (expected return based on, say, expected rental income) remain overvalued by normal standards.

So isn't calling for asset inflation of these overvalued assets a bad idea?