There exist many symptoms and emerging economic trends suggesting that the Japanese economy is headed in the direction where many European economies ended up in much of 1980s and 1990s. This paper makes highly speculative long-run forecast, based upon a comparison of two stylized models of the Japanese and "Euro" labor markets. We argue that Japano-Sclerosis, if there is one, should look rather different from Eurosclerosis in 1980s and 1990s. Our forecasts are the following. (1) Because of the resilience of the unique recruiting system of the school leavers, the Japanese economy is unlikely to face chronic high unemployment and joblessness, which plagued the Euro economies for decades, whereas (2) the chronic problem in the labor market is more likely to manifest itself as extremely low labor turnovers, and stagnant output growth and earnings. (3) Both circumstantial evidence and model implication suggest that the core characteristics of the Japanese labor market will remain unchanged even if the stagnation of the economy continues or even worsens in the future..
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