recovery is under way . Consider the case of Japan in its first lost decade of the 1990s . After falling 63 percent from its peak in late 1989 , the Nikkei staged a 32 percent rally in one month . It then remained volatile but around the same level for nearly 10 years -- because the return on assets and capital investors could earn proved so low throughout that economy . During the 1990s , Japan 's banking system was burdened with bad loans that kept eating into profits and its nonfinancial companies had excess capacity that had to be wound down ; these problems were made worse by a decline in the working population . The initial excess of capital , supplemented by high ongoing savings from households and corporations , kept interest rates low . Throughout this period the price/earnings ratio on stocks ranged from 30 to 50 -LRB- it 's 51 today -RRB- , compared with 15 to 20 in Europe and the United States . The logic was simple : With so little return available on all assets , local investors were willing to pay up for stocks even if the dividends were a paltry
Editor 's note : Simon Johnson , a former International Monetary Fund chief economist , is a professor at MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics . Peter Boone is chairman of Effective Intervention , a UK-based charity , and a research associate at the Centre for Economic Performance , London School of Economics . They run http://baselinescenario.com/ , a global economy Web site . Simon Johnson , above , and Peter Boone say the U.S. could be in for a long period of virtually no growth . -LRB- CNN -RRB- -- Euphoria returns ! Who could have guessed that Bank of America stock would rally 70 percent the week it learns the Feds are demanding new capital equal to nearly half the bank 's market capitalization ? The ongoing grim news -- on rising unemployment , continued -LRB- albeit slower -RRB- economic decline , and ordinary working Americans being hammered on all sides -- is being ignored by stock and commodity markets . Is America now back on track for growth ? The answer to that is almost surely no . Rising stock markets do n't necessarily mean a sharp