While investors and keen watchers of the U.S. economy wait with bated breath to learn whether and how much the Federal Reserve might cut interest rates following its upcoming meeting, an ocean away, another vital meeting centered on raising interest rates could have significant ramifications to not only the U.S. but global economy as well.

In the corridors of economic history, Japan has often been viewed as a cautionary example of what happens when a developed economy succumbs to long-term stagnation. While many policymakers have dismissed Japan’s "Lost Decades" as a unique case, the reality is more alarming. Japan’s persistent slow growth, driven by mounting debt and external pressures, mirrors trends in the United States.

Though Japan’s GDP is only a fraction of America’s, the economic paths of the two nations are growing eerily similar. As such, it’s time to stop seeing Japan as an anomaly and instead heed the warning of a looming crisis if fiscal responsibility isn’t restored.

Japan’s economy was once the envy of the world, rising rapidly from the ashes of World War II to become a global industrial powerhouse. But in the 1990s, Japan’s miracle collapsed.

A massive asset bubble burst, plunging the country into a slow growth and deflation cycle. Despite numerous stimulus packages and monetary easing, Japan’s public debt has ballooned to over 260% of GDP.

Does this sound familiar? It should, as the U.S. is on a dangerously similar trajectory. After navigating housing bubbles, credit crises, banking failures  and a global pandemic, our national debt has now surpassed $35 trillion, with the economy increasingly dependent on borrowing to drive growth.

More than a decade of the Federal Reserve's near-zero interest rates and quantitative easing mirrors Japan's reliance on easy money to fend off recession. Although recent rate hikes in the U.S. have been implemented to combat inflation, the current ~5.25% rate is merely in line with the 50-year average.

Yet, at the first sign of inflation easing, there’s widespread demand for rate cuts. This addiction to debt and cheap money is unsustainable — and the consequences could be severe.

Liberal U.S. supporters of the progressive “Modern Monetary Theory” dismiss the lesson of Japan’s massive debt load. Sure, the country holds significant assets, as the world’s largest creditor, with over $1 trillion in U.S. government debt and substantial foreign investments in Africa, Latin America, and Southeast Asia, but Japan’s assets are largely illiquid, leaving them vulnerable to shocks while its debts continue to accumulate.

Japan’s wealth is tied up in long-term investments fueled by borrowed money, limiting its flexibility in times of need. Japan’s debt addiction has left it with few options for recovery. The country is caught in a cycle where the government must continue borrowing to keep the economy afloat.

Again, do you think this sounds familiar? The U.S. is heading down a similar road, with interest payments on the national debt approaching unsustainable levels and stopgap measures, like continuing resolutions to fund the government, becoming the new norm.

Unlike Japan, which has struggled with deflation, the U.S. has spent the past two years fighting record inflation.

Yet, the core issue remains unchanged: excessive debt. Recent calls for the Federal Reserve to cut rates as inflation slows risk a premature move that could trigger a resurgence in inflation, forcing the Fed to raise rates again — a scenario reminiscent of the mid-to-late 1970s and early 1980s. If history repeats itself, the U.S. could face a harsh choice: slashing critical government services or sinking deeper into debt.

This difficult trade-off mirrors what Japan has faced for years — a path the U.S. must avoid.

Another significant threat to Japan’s economy is the slowing growth of China, its largest trading partner. China accounts for 22% of Japan’s total trade, including imports and exports. Japan exports machinery, chemicals, and high-end electronics to China while relying heavily on Chinese consumer goods, textiles and raw materials.

Many Japanese companies have manufacturing plants and research facilities that are deeply integrated into Chinese supply chains. When China slows, so too does Japan’s economy.

Similarly, China is one of the United States’ largest trading partners, representing 14% of our total trade – only 1.5% below our largest trading partner, Canada. A slowing Chinese economy will also have a dramatic economic impact on the U.S..

However, Japan's most dangerous lesson is the risk of long-term stagnation. After its bubble burst in the early 1990s, Japan entered a period of weak growth that continues today. Despite aggressive monetary and fiscal policies, the country has been unable to reignite the kind of robust economic activity seen in its earlier years.

The U.S. faces similar risks. While the economy has seemingly bounced back from recent crises, relying on government stimulus and low interest rates to prop up growth is unsustainable. Without addressing deeper structural issues — such as fiscal responsibility, entitlement reform, and declining productivity — the U.S. risks falling into the same stagnant trap that has plagued Japan for three decades.

Japan’s struggles are not just a distant economic story—they are a warning to the U.S. that borrowing without a plan for repayment, ignoring economic trends, and relying on short-term fixes can lead to long-term stagnation.

If American policymakers don’t address these growing vulnerabilities, the U.S. risks becoming the next developed nation to enter a prolonged period of economic decline. The canary in the coal mine has been chirping for years — it’s time to listen before it’s too late.