HONG KONG: Not a day goes by without Japan's so-called "lost decade" being wheeled out in support of pleas for bigger and faster injections of government money into wobbly financial systems and weakening economies. Japan's allegedly inadequate response to the bursting of its asset bubble 18 years ago is said to have led to years of deflation, government deficits and minimal economic growth. Today Japan's stock prices are still one quarter of their 1990 peak. According to this wisdom, Japan is the example to be avoided unless the U.S. and others are to have their own decades of deflation and decline.

But is it? Could the assumption be an inflationary trap? Could the Japanese have been wiser than you think?

There are many criticisms that can be made of official Japan's failure to recognize the extent of post-bubble, asset-price declines and their impact on banks, consumer confidence and corporate balance sheets. Much government spending that was supposed to spur demand went on economically wasteful pork-barrel projects and bridges to nowhere. Politics and bureaucracy thwarted structural reforms.

But before foreigners jump to too many conclusions about Japan's failures, they would do well to look at the data of Japan's actual performance during the "lost" years.

Japan never had a major post-bubble crisis, just years of gradual adjustment. Deflation of consumer prices did occur for a number of years but it was never above 0.9 percent in any one year and cumulatively was no more than 6 percent. This relatively modest if lengthy level of deflation, common in the 19th century, should only be viewed as dangerous by nations whose financial and debt structures are geared to price inflation. In Japan, consumer prices are now at the same levels as in 1992. Nominal returns on savings have been low but positive in real terms - in other words, better than in the United States since 2000.

A significant part of the deflationary pressure can also be attributed not to post-bubble financial policies but to the near doubling of the yen's value forced on Japan by the Plaza Accord in 1985. Appreciation culminated in a peak of 85 to the dollar in 1995 compared with 240 a decade earlier.

Japan's GDP performance looks worse than its peers partly because Japan's population has barely grown over this time and has begun to shrink while most other developed countries still have population growth. For sure, Japan has a serious demographic problem - which Germany and Italy will soon emulate - but that is a different issue and one that financial policies cannot address.

When measured against other developed countries in per capita terms Japan's overall performance has been moderate rather than bad. It was very weak in the late 1990s, with two years of contraction, when the East Asian crisis led to sharp export contraction. But for this decade so far, Japan's per capita growth has exceeded that of the United States, Germany and France. Of the major developed nations it was only exceeded by Britain, which was boosted, until recently, by financial services and household borrowing booms. Japan's cumulative per capita growth this decade has been 13.7 percent compared with 12.5 percent for the United States.

Roughly the same results are shown if one measures Japan's per capita income on a purchasing-power parity basis. European Union data for 1998-2007 indicate that Japan's fell slightly, compared with the United States and Britain but gained on Germany

Indeed, perhaps the only overall conclusion that can be drawn from the data is that the United States and Britain became ever more reliant on foreign capital to finance their growth and consumption while Japan, like Germany, continued to show the savings excess needed by countries with rapidly aging populations. Contrary to the United States, growth today was being sacrificed for security tomorrow. The government borrowed heavily, but from Japanese, not foreigners. Meanwhile, Japan continued to accumulate foreign assets. In other words the Japanese may have been behaving in a much more rational manner than they are given credit for.

By learning the wrong lessons from Japan, the United States and others are stoking renewed inflation and putting off the years of savings needed by their aging populations.