SINKING FEELING

In 1990, Japan was the envy of the United States – decades of economic expansion; the Nikkei reached a new high of 38,915 on New Year's Eve 1989; Japanese companies thrashed US rivals in many industries; Japanese investors bought up icons like the Rockefeller Center. Japanese business was a model to the world.

But by 1996 the Nikkei had plummeted 60 percent, real estate values were cut in half, and the long-booming economy was in persistent recession and stagnation. Today Japan's situation remains bleak.

In 2000, the US found itself in a position like Japan's a decade before – the Dow was at a record 11,722; the US led all comers economically and technologically. Its mix of aggressive entrepreneurship and conservative accounting was the new model.

The question is: given the Dow's fall since early 2000, the bursting of the dotcom bubble, and the accounting scandals, will Japan's fate happen here?

Gregory Wilson, co-author of Dangerous Markets: Managing in Financial Crises, argues that the most important reason why it shouldn't is the willingness of US government policymakers to tackle unpleasant but necessary tasks.

Wilson points to the 1980s savings and loan scandal, when Washington-based regulators moved relatively quickly to close insolvent institutions and sell off their assets. In Japan, regulators have failed to deal similarly with their bank crisis.

And, Wilson says, US enthusiasm for problem solving continues. Just months after accounting shenanigans at Enron and Adelphia Communications came to light, stock exchanges tightened listing requirements, Congress passed a corporate-oversight law, and high-profile businessmen were led away in handcuffs.