Financial crisis : US 2007 Vs Japan 1990

The bubble economy in Japan from 1985 to 1990 was caused by financial liberalization, 'cheap money', enormous trade surplus and yen appreciation against foreign currencies. Excess liquidity led to excess speculation in stock and property markets. Within a period of 5 years, Nikkei 225 index went from 10,000 to a peak of 38,916 by 31 December 1989. The land price in Tokyo's Ginza area reached US$ 1 million per sq. meter. At the peak of the property bubble, Thayer Watkin mentioned in his paper 'The bubble economy of Japan' that "the aggregated property value in Japan was four to five times the aggregated property in the US". Barkley Rosser noted in 1990, the aggregated value of all land in Japan was 50% greater than the value of all land in the rest of the world. This is something really crazy and hard for anyone to imagine. Equally hard to imagine is the land price in Tokyo's Ginza business district can dropped from US$1 million/sq. m to US$ 10,000/sq.m (1% only) by 2004. Residential property price in 2004 was equal to about 10% of that during the peak and yet it remained as the most expensive in the world.

The chart below compares the Nikkei 225 Index with the Dow Jones Industrial average from 1985 to June 2009.
The 1990 Japanese bubble brought with it a similar credit crunch, unemployment and reduced consumption and sent the economy into recession. The Japanese Government flooded the market with liquidity and held interest rate close to zero. However, the Japanese Government was unable to revitalize its economy until 2004 (14 years).

From the chart shown above, Nikkei from 1990 to 1992 dropped 59% in 31 months before the market stabilized and moved in a-b-c-d-e side way formation until year 2000. Nikkei has another sharp drop of another 60% from year 2000 to year 2004 during the economic crisis caused by the dot-com bubble.

Dow dropped 54% in 17 months from October 2007 to March 2009. Compared to Nikkei, Dow dropped at a faster rate within a shorter period. Since March 2009, Dow has rebounded 34% until end of June 2009. The main question is whether this rebound marks the beginning of the 'long journey' side way consolidation (8 years for Nikkei) ?

Based on the semi-log chart from 1900 to 2009 as shown below, if Dow is currently in Mega wave IV, judging from the "simple" form of Mega wave II, as I have explained in my old posts before, I am expecting a "complex" Mega wave IV, it is going to last many years.