The Obama Administration and the Prospects for Economic Recovery in the U.S. and Japan By Vivien Ng, MBA ‘09   The Japan Society, Nomura Holding America Inc., The Women’s Bond Club of New York, and the Center on Japanese Economy and Business (CJEB) of Columbia Business School cosponsored the symposium, “America Has Voted: Impact of New U.S. President on Asian Markets” on January 29, 2009.   Sitting on the panel were three distinguished speakers: Alicia Ogawa, Director of the Program on Alternative Investments at CJEB; David Resler, Managing Director and Chief Economist at Nomura Securities International, Inc.; and Jeffrey Young, Chief Economist at Platinum Grove Asset Management. Leslie Norton, Foreign Editor, Asia at Barron’s moderated the discussion.   Opening the dialogue, Ms. Ogawa said she had just returned from Japan and was impressed by the level of pessimism there, “I’ve never seen this level of hopelessness on all levels – politics, economics and demographics.” Mr. Young said a possible reason for this pessimistic outlook is that the Japanese are watching the United States follow in the footsteps of Japan in the 1990s. They know the Japanese economy is coupled with the U.S. economy, and based on their own “lost decade,” they are not confident that macroeconomic policies in the United States will work. Thus, a major task for the Obama administration is to restore confidence in macroeconomic policies, said Mr. Young.   There is some enthusiasm for Obama in Japan and he is seen as popular and inspiring, Ms. Ogawa said, but there is also a fear that Obama will have a “short-lived honeymoon and also some concern about how pro-Japan certain areas of his administration will be.”   Mr. Resler said that what has been happening recently in the global markets is an “utter refutation” of the idea that the United States and the rest of the world were being decoupled. Instead, “when the U.S. catches a cold, the rest of the world catches the flu,” he said.   Mr. Resler ventured that the United States will emerge from the current economic crisis before Japan based on the latest awful GDP data for Japan, which he said is even worse than the U.S. GDP data and implies a “huge implosion” of the Japanese economy. Ms. Ogawa agreed, adding that Japan has problems the United States does not have, the most obvious being its aging and declining population. Furthermore, the manufacturing base in Japan is still the center of the economy, but Japanese manufacturers are finding it increasingly difficult to compete with top players in Korea and other neighboring countries, she added. Most strikingly, she was “astounded” that so little has changed in Japan’s financial industry after the 1990s, especially the relative weakness of Japanese banks in evaluating credit and pricing that correctly. As a result, capital is not being allocated to the most efficient, high-growth, and promising companies or industries, thus hampering the economy, she said.   However Mr. Young noted that there is some reason to think that the Japanese economy will recover first, as it was not as undercapitalized as the U.S. economy. He said, “The holes that have been blown in the U.S. financial institutions’ capital by the leverage positions on the different types of structured credit – I don’t think it’s of the same magnitude in Japan no matter how pessimistic you are about what the Japanese banks have or have not done since the crisis.”   Click here to watch video.