Heritage Foundation president Ed Feulner writes in a Jan. 13 CNSNews.com column:
Facing a deep recession, the Japanese implemented 10 separate spending stimulus packages between 1992 and 2000. Spending on public infrastructure was a major part of each one. Yet the Japanese economy refused to cooperate. After eight years of “stimulus” Japan’s economic growth was anemic. The Japanese economy grew at an annual rate of only 0.6 percent between 1992 and 2007. During that time, eight countries surpassed Japan’s per capita income. So much for infrastructure stimulus.
Japan's monetary and fiscal stimulus did help to lift the economy. After a recession in 1993-94, GDP was growing at an annual rate of around 2.5% by 1995. But deflation also emerged that year, pushing up real interest rates and increasing the real burden of debt. It was from here on that Japan made its biggest policy mistakes. In 1997 the government raised its consumption tax to try to slim its budget deficit. And with interest rates close to zero, the BoJ [Bank of Japan] insisted that there was nothing more it could do. Only much later did it start to print lots of money.
Feulner cited Japan as a way to prove that "Government stimulus spending can’t manufacture prosperity." But by cherry-picking numbers and ignoring events that don't fit with his storyline, Feulner hides the fact that the truth appears to be otherwise.