The Economic Risk of Excess Capacity
From Naked Capitalism. Regardless of how persuasive the views of Ambrose Evans-Pritchard are, Japan once had a serious problem on excess capacity in the late 1990s. At that time, many Japanese corporates had trio structural problems, excess debt, excess workers and excess capacity. I understand these problems are closely tied together, and closely related to expected demand in the future. The most important thing is that a company could recognize its own proper levels of debt, workers, and capacity not only by considering current sales but also by expecting the future demand of the company or the industry overall. Through the recovery process in the 2000s, Japanese companies both streamlined their labor force and capital stocks and expected higher demand.
