Japan Lost Decades

12 Key excerpts on "Japan Lost Decades"

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  Japan's Quiet Transformation

  Social Change and Civil Society in 21st Century Japan

  • Jeff Kingston(Author)
  • 2004(Publication Date)
  • Routledge

    (Publisher)

  1 The Lost Decade ofthe 1990s

         

  The so-called Lost Decade of the 1990s has been misunderstood because it really marks a watershed in Japan and has been a time of far reaching transformation. Gerald Curtis, Professor of Political Science, Columbia University, July 26, 2002

  During the Lost Decade the powerful and privileged lost while ordinary people benefited.

  Miyazaki Ikuko, founder of Mail Magazine , an internet job information service for working women, August 2002

  The final ten years of the twentieth century have been called a ‘lost decade’ for Japan, which continues to suffer woes from the burst of the late-1980s bubble economy. Japan's comeback as a globally competitive economic powerhouse will require fundamental reforms not only in the industrial and financial sectors but also in government administration, politics and social systems, including education, the judiciary and immigration.

  Japan Times , January 1, 2001

  The 1990s in Japan have been dubbed the Lost Decade. This is a period when the economy imploded, the asset bubble collapsed, banks teetered on the edge of insolvency, unemployment skyrocketed, suicides increased and the leaders of Japan, Inc. were tarnished by exposés of pervasive corruption. The nation of the ‘economic miracle’ found itself looking into the abyss, lunging from the swaggering late 1980s, when commentators gushed about a Pax Nipponica, to the sobering realities of the turn of the century when analysts predicted systemic collapse. The nation's credit rating slumped to the level of junk bonds and zombie companies staggered towards bankruptcy. Everything seemed to go wrong at the same time, an inauspicious beginning to the Heisei era, a period that has virtually become synonymous with Japan's prolonged recession.1

  What was lost in the Lost Decade? Mountains of money, a sense of security, stable families, and the credibility of the nation's leadership. To this standard list of debits one might add hubris and confidence about the future. The mighty have been brought low and the reputations of some have been dragged through the mud. Many topics that were once carefully avoided have now been brought into the open: subjects such as money politics, mob influence, and pervasive malfeasance are now regularly aired in a feistier national press. Also lost in the 1990s was an orchestrated innocence about the nation's shared past with Asia between 1931 and 1945.

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  Examining Japan's Lost Decades

  • Yoichi Funabashi, Barak Kushner, Yoichi Funabashi, Barak Kushner(Authors)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  3 The two “lost decades” and macroeconomics Changing economic policies Kobayashi Keiichiro DOI: 10.4324/9781315715223-3

  Introduction

  The expression “lost decades” is nowadays used to refer to the economic and market decline and broad political and social conditions in Japan in the last decade of the twentieth and the first decade of the twenty-first century. As Andrew Gordon points out in Chapter 5 , the term gained currency in the media, first foreign, then Japanese, in the second half of the 1990s. At the time, the phrase was used to refer to the long-term decline in Japan’s growth rate that had started at the beginning of the 1990s, in contrast to the remarkable economic growth shown in the decades after World War II, especially from the 1960s onwards.

  Japan’s growth rate plummeted in the 1990s, and it remained low in the early years of the twenty-first century. In terms of GDP growth, it is indeed appropriate to say that these two decades were lost. However, the demographic shifts that Seike Atsushi discusses in Chapter 1 , including the population decline and changes in the working-age population since 1995, give rise to a slightly different picture. As Figure 3.1 shows, during the 2000s the working-age population’s per capita GDP growth rate in Japan actually outshone that of the United States. It may not be so simple therefore to describe the past twenty years as completely “lost.” The evidence suggests that the situation is slightly more nuanced, and varying opinions among economists demonstrate something far from a consensus.

  This chapter adds an additional perspective to the study of the lost decades. It does so in two ways: first by investigating the macroeconomic policies that were taken at the time and second by elucidating the opportunities that were gained and lost during the two lost decades. In this way, lessons can be learned for present-day Japan and advanced Western countries.

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  Great Recession, The: History, Ideology, Hubris And Nemesis

  History, Ideology, Hubris and Nemesis

  • Michael Siam-Heng Heng(Author)
  • 2010(Publication Date)
  • WSPC

    (Publisher)

  Chapter Four

  Insights from Japan’s “Lost Decade”a

  Introduction

  In retrospect, the most dramatic turning point in the half-century of Japan’s postwar economic development was the collapse of the property and stock market in 1990. The collapse ushered in a very long period of recession known as the “lost decade”.1 Japanese economy experienced average annual real growth of 0.8% from 1991 to 2001.2 One would expect that with fiscal stimuli, the economy would recover as in a normal business cycle. But somehow the recovery simply refused to show up. Conventional wisdom of economic stimulation does not tally with the Japanese experience of the long recession. The “lost decade” has acquired such an iconic status that economists and business columnists have evoked it as a possible prospect of the current recession for the USA.3

  Indeed, as the second largest economy in the world and operating in an electoral democratic framework, its experiences may shed some light on the nature of recession of an advanced industrial economy in the context of globalization, as well as the limitations of monetary and fiscal stimuli to deal with such a recession.

  There are three reasons for us to study Japan’s experiences for insights. First, America’s and the UK’s troubles are in some deep sense similar to Japan’s. They are a result of a real estate bubble and easy credit. The prices of resident property in 10 largest cities of the USA doubled in five years, just like those prices in Japan’s big cities during the bubble period.4 What is more disturbing is that nationwide, prices of resident units, and commercial property in the US and the UK shot up more than they did in Japan. It is also relevant for Asia because a property bubble preceded the 1997 crisis. Second, Japan shares the essential features of an advanced industrial economy with Western Europe and the USA. The “lost decade” is likely to hold lessons for them. Third, the Japanese trajectory of economic development has offered very useful concepts for other Asian countries to emulate. This pattern is captured metaphorically in the “Flying Geese” model.5

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  Japan's 'Lost Decade'

  Causes, Legacies and Issues of Transformative Change

  • W. Miles Fletcher III, Peter W. von Staden(Authors)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  Dreams of economic transformation and the reality of economic crisis in Japan: Keidanren in the era of the 'bubble' and the onset of the 'lost decade,' from the mid-1980s to the mid-1990s

  W. Miles Fletcher III Department of History, C.B. 3195, Hamilton Hall, University of North Carolina, Chapel Hill, NC 27599-3195. USA

  This study examines the dynamics of the development of Japan's notorious 'lost decade' from 1990-2003. This economic downturn marked the end of four decades of strong economic growth and is still affecting the Japanese economy today. While previous studies have focused on government policies to explain the nation's slow response to this crisis, the attitudes of the Japanese business community merit more attention. For example, the leaders of Keidanren. the powerful representative of big business in Japan, defined a set of economic challenges facing Japan in the late 1980s and neoliberal solutions that blinded them to the significance of the economic bubble that developed at that time and its subsequent collapse. Since then. Keidanren's prescriptions for reviving the Japanese economy have remained essentially the same.

  Introduction

  The economic stagnation that Japan experienced between 1990-2003, what the Japanese have dubbed as the lost decade, marked the end of four decades of impressive economic growth. After nearly 15 years of rapid growth starting in the late 1950s, the economy had weathered the oil crisis of 1973-1974 to resume a more moderate but still steady pace of expansion. The nation's economic prowess prompted scholars to search for the reasons for this success (Vogel 1979, Johnson 1982). Now, studies often focus instead on the causes and effects of the economic crisis that gripped Japan during the 1990s, commonly known as the lost decade (Katz 1998, Grimes 2001, Lincoln 2001, Amyx 2004, Beason and Patterson 2004, Rosenbluth and Thies 2010).

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  The World Economy

  Growth or Stagnation?

  • Dale W. Jorgenson, Kyoji Fukao, Marcel P. Timmer(Authors)
  • 2016(Publication Date)
  • Cambridge University Press

    (Publisher)

  3 The structural causes of Japan’s Lost Decades kyoji fukao, kenta ikeuchi, hyeogug kwon, younggak kim, tatsuji makino, and miho takizawa 3.1 Introduction Since the burst of the “bubble economy” in 1991, Japan has experienced sluggish growth in the economy overall as well as in total factor produc- tivity (TFP). 1 The first ten years of this stagnation – the “Lost Decade” – have been the subject of a considerable body of research. Studies have focused on financial problems such as banks’ non-performing loans, firms’ damaged balance sheets, and deflation as the main causes of Japan’s stagnation. 2 By the early 2000s, Japan had largely resolved the non- performing loan problem as well as the problem of damaged balance sheets, but economic growth hardly accelerated, resulting in what now are “Two Lost Decades.” The argument put forward in this study is that Japan’s Two Lost Decades are not a transient problem of sluggish eco- nomic growth as a result of inappropriate fiscal and monetary policies but need to be seen from a more long-term and structural perspective, reflect- ing a chronic lack of demand and a long-term decline in productivity. It is certainly true that during the past two decades, Japan has persistently suffered from deflation or inflation that has remained below the central bank’s target. And there is no question that Japan needs to resolve the problem of deflation and escape from its liquidity trap in order to restore the effectiveness of conventional monetary policy. However, it seems very unlikely that Japan will be able to resolve its structural problems simply by stoking sufficient inflation to keep real interest rates negative or at least extremely low.

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  Financial Crisis, Contagion, and Containment

  From Asia to Argentina

  • Padma Desai(Author)
  • 2014(Publication Date)
  • Princeton University Press

    (Publisher)

  4 Japan: The Lost Decade of the Nineties amidst Policy Paralysis T HE J APANESE ECONOMY’S prolonged decline in the nineties turned into a recession toward the end of 2000 marked by mounting price deflation. During this period, attempts to revive the economy via fiscal pump priming led to resource misuse into pork barrel projects. Monetary easing failed to stimulate consumer demand by households or capital spending by industry. A softening of the yen in late 2001 calculated to boost exports raised protests from Asian neighbors and the U.S. treasury. The prolonged policy paralysis, which I analyze in this chapter, arose from the leadership’s failure to enforce a cleanup of banks that were burdened by massive nonperforming loans and free Japanese industry from widespread regulations and high taxes. The economy’s decline also affected Japan’s traditional role as an active investor and lender in the small Asian economies and affected their export sectors as the Japanese recession coincided with that of the U.S. after 9/11. The Mounting Economic Malaise In the late eighties, propelled by expansionary fiscal and easy monetary stimuli, Japan turned into a bubble economy of unparalleled asset price inflation especially in urban land values that rose sevenfold in less than a decade, in turn providing collateral against bank lending to companies that dizzily invested in real estate and urban property. The keiretsu, “happy-family” links between banks and industry groups marked by cross-shareholdings and low-margin corporate lending by banks, misallocated capital in dubious projects financed by bank loans to the tune of 12 percent of gross domestic product (GDP) when asset prices collapsed from their 1990 peak. Property prices continued tumbling for the ninth year in a row in 1999 forcing sales of some urban commercial properties at 80 percent or more below their peak values

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  Modern Japan

  A Social and Political History

  • Elise K. Tipton, Elise Tipton(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  12  The ‘lost decade(s)’

  The collapse of the bubble economy in the early 1990s ushered in more than one ‘lost decade’ of economic growth, and it contributed to a wide sense of social and political malaise by the beginning of the new millennium. Far from the new century being a ‘Japanese century’, some foreign commentators now characterized Japan as a ‘setting sun’, as opposed to a ‘rising sun’. To some Japanese observers as well, many of the institutions, structures and values that fostered Japan’s economic growth and social stability in the past came to be seen as obstacles to growth. Recurrent recessions, ‘restructuring’ and high unemployment rates shredded postwar Japan’s social contract – economic prosperity for all in return for hard work and loyalty. Instead, they created insecurity and new troubled social groups of once privileged middle-class salarymen and university graduates, while social issues of ageing, minority discrimination, women’s inequality and problems of children and teenagers remained unresolved. Dashed was the myth of most Japanese as middle class, replaced by a sense of an unequal society (kakusa shakai). The mass media, popular culture and consumer industries were often blamed for spreading materialist values and encouraging violence and decadence. We will see that they also offered some new role models and lifestyle choices and pride in Japan’s ‘soft power’ throughout the world.

  In contrast to the years of miracle growth, the government, including both politicians and bureaucrats, seemed too mired in corruption and conservative values to lead the country out of the economic slump. Moreover, political confusion and unstable leadership set in with the collapse of the ‘1955 system’ in 1993. The need for structural reform of politics and the economy was voiced everywhere, but little progress was made in practice. As a leading newspaper editorialized during the lead-up to the first general election of the twenty-first century, ‘the 1990s is often referred to as a “lost decade.” Much of the blame for this lost time falls on political parties for their inability to fulfill their primary obligations’.1

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  Too Much Stuff

  Capitalism in Crisis

  • Yamamura, Kozo, Kozo Yamamura(Authors)
  • 2017(Publication Date)
  • Policy Press

    (Publisher)

  EIGHT

  Japan: bubbles, “lost years” and Abenomics

  Introduction

  The Japanese economy entered its “bubble” years in the late 1980s, but the bubble burst in 1991, ushering in a period of economic stagnation that continues today. The economic policies adopted since 1991 have been pro-investment policies that are ineffective in the new world. The incompetent conservative and center-left governments of the 2009–12 period prolonged the stagnation, and since 2013 the government of the conservative Liberal Democratic Party has been pursuing a delusional variant of pro-investment policies. This chapter first discusses the bubble years and the period to 2008, and then the period from 2009 to the present.

  The bubble and the “lost” years, 1980–2008

  At the beginning of the 1980s, Japan was flying high. The economy was growing at almost 4 percent per year and many people in Japan and the West were touting Japanese economic institutions and practices as models the West should emulate. During the second half of the 1980s, the prices of stock and land both soared, the Japanese travelled abroad in unprecedented numbers and foreign investment by Japanese companies increased very rapidly. For example, Japanese FDI (foreign direct investment that does not include investments in stocks and bonds) in the US surged from $2 billion in 1985 to $20 billion in 1990.

  The reason for the soaring prices of land and stocks during the second half of the 1980s was the Plaza Accord of 1985. This was an agreement among the US, Japan, West Germany, the UK and France to depreciate the dollar against the yen and the German mark. The request for the agreement came from the US, where industries were facing a significant competitive disadvantage because the value of the dollar had risen so strongly, especially against both the yen and the mark. Japan’s central motivation in agreeing to the terms of the Accord was to minimize trade friction with the US, its most important customer. Also, the US was providing a “nuclear umbrella” under a bilateral mutual security treaty that enabled Japan to spend only 1 percent of its GDP on national defense, while Germany was spending about 3 percent and the US close to 6 percent of GDP on defense.

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  East Asia: Growth, Crisis & Recovery

  • David L Western(Author)
  • 2000(Publication Date)
  • World Scientific

    (Publisher)

  9-15 Conclusion It should come as no surprise that a mercantilistic Japan fell victim of its own success. Accumulating wealth has its costs in terms of asset price inflation and underwriting speculative fever. Unlike previous recessions that were inventory and over-capacity related, this great recession of the 1990's stemmed from Japan's over-heated asset market. Expenditure flows contracted in response to collapsing asset price levels. Financial sector disintermediation compounded the softness in aggregate spending by constricting lending flows. A vicious circle of debt-deflation suffocated corporate, household and financial sector balance sheets. Such a virulent interaction posed an enormous policy dilemma for Japan's policy makers. That is, how to kick-start the economy once dynamism was lost. A lethargic and sick economy plagued Japan for most of the 1990's. East Asia could learn well from Japan's corporate sector and policy mistakes. Chapter 10 examines how East Asia can turn a crisis into an opportunity by learning from Japan's financial sector malaise and its own governance mistakes.

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  Japan Inc. on the Brink

  Institutional Corruption and Agency Failure

  • S. Carpenter(Author)
  • 2014(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Conclusion: The Third Lost Decade?

  Abe’s brew of reckless monetary policies combined with a revved-up version of tired fiscal policies mixed with a good dose of neo-nationalism may prove disastrous. Why Japan Can’t Reform detailed the brief administrations of Prime Ministers Abe, Fukuda and Aso (2006–9) in their attempts to drag Japan’s floundering economy out of deflation, to lower public debt and to initiate institutional reforms. However, their administrations were plagued by political scandals and factional bickering and initiatives for structural reforms were postponed.

  Economic statistics up to July 2008 lent to the evaluation of continued economic deterioration at the regional level. The book predicted that the economy would stay in mild recession and that regional development would stagnate due to SME bankruptcies with regional banks burdened with defaults as well as a load of non-performing loans.

  Fiscal policies were also detailed in order to emphasize that government policies mimicked the policies that were implemented in the 1990s. There was the state recapitalization of banks, fiscal stimulus packages that poured state funds into public works projects, long-term, low-interest rate loans and credit guarantees to small businesses, and so forth. But the policies did little more than postpone tackling the root problems in the economy and prepare Japan for dealing with domestic crises such as the recent nuclear event and the impact on its export-driven economy by the current economic slowdown.

  Continuing mercantile policies resulted in an unremitting dependency on consumer economies, historically the US. Protectionist policies resulted in the highest current account balance and one of the lowest rates of FDI among the OECD countries (2 percent of the annual GDP). Japan had a massive public debt that was recorded in mid-2008 as 190 percent of the annual GDP (the highest among the member nations in the OECD).

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  Japan's Financial Slump

  Collapse of the Monitoring System under Institutional and Transition Failures

  • Yasushi Suzuki(Author)
  • 2011(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  We have seen that the Japanese economy stagnated with a growth rate below 3 per cent since 1991 and recorded negative growth rates in 1993, 1998 and 2001 (Cabinet Office 2009). In order to cope with the economic stagnation after the collapse of the stock market and real estate bubbles in the early 1990s, the Japanese government repeatedly implemented macroeconomic policies that expanded public investment and other government spending. The expansion of public spending, however, did not bring about a sustainable recovery of private demand and failed to shore up the stagnant economy, despite substantial increases in budget deficits (Cabinet Office 2002, p. 1). Meanwhile, the Japanese economy also went into a deflation reflected by a persistent decline of prices. Japan’s general price level (excluding fresh food) as estimated in the Consumer’s Price Index (CPI) has been staying below year-earlier levels since autumn 1999. The index fell into a year-on-year decline of 0.9 per cent in fiscal year 2002 (Cabinet Office 2003), after having remaining flat in 1999 and posting a decline of 0.4 per cent in 2000 (Cabinet Office 2001, p. 39). Japan’s GDP deflator also indicated that the Japanese economy 156 Japan’s Financial Slump had been in a mild deflationary phase since the mid-1990s. The GDP deflator posted a negative year-on-year growth of 1.6 per cent and 1.1 per cent in 2000 and 2001, respectively (Cabinet Office 2001). This was an unprecedented experience in post-war Japan, while no other developed country had ever experienced such a lingering deflation dur- ing the same period. The Japanese government analysed the deflation as partly caused by ‘supply-side structural factors’ (Cabinet Office 2001) such as an increase in low-priced imports from China and other countries. The government also drew attention to ‘demand factors’ due to the weaknesses of the economy as another set of factors behind the deflation.

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  Japan's Nuclear Crisis

  The Routes to Responsibility

  • S. Carpenter(Author)
  • 2011(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Japan’s economic problems were attributed to macro-economic reasons emanat- ing from inflated property and stock prices. The possibility that major structural problems in the Japanese governing system itself were con- tributing factors was generally not considered until fiscal stimulus pack- ages not only failed to ignite the economy but also sent government debt sky-rocketing. There was also little recognition that the network of bureaucrats throughout business and the political community could act to ossify the political economic system and was a major factor in Japan’s inability to take the necessary measures to salvage the economy. Japan’s second lost decade: institutional paralysis Japan’s second lost decade revealed that the ties between the bureaucracy, the business community and elected officials served to sustain a rigid and inward model of government administration which paralyzed the deci- sion-making process and prevented the implementation of the reform of the system to accommodate the ever-changing demands on the domestic front and the external impacts from international markets. Koizumi’s campaign mantra ‘structural reform with no sacred cow’ and ‘no growth without reform’ promised fiscal and state sector reforms and the tackling of the non-performing loan problem. Koizumi was a flamboyant politician and very popular among voters. However, when he entered office in 2001 Japan’s economy was in recession. The annual GDP growth rate had contracted by 0.5 percent (the first annual drop in three years), and the sovereign debt had climbed to 130 percent of the GDP. Manufacturing output plummeted by 1.5 percent from its mid-2000 peak – a thirteen-year low. Property prices fell by 5.9 percent, the fastest decline in nine years, with commercial property falling by 8.3 percent, which was 63 percent below the peak value registered in 1993.

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