Lost Decades
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The Lost Decades is a lengthy period of economic stagnation in Japan precipitated by the asset price bubble's collapse beginning in 1990. The singular term Lost Decade (失われた10年, Ushinawareta Jūnen) originally referred to the 1990s,[1] but the 2000s (Lost 20 Years, 失われた20年)[2] and the 2010s (Lost 30 Years, 失われた30年)[3][4][5] have been included by commentators as the phenomenon continued.[4]
From 1991 to 2003, the
Broadly impacting the entire Japanese economy, over the period of 1995 to 2007, the country's GDP fell from $5.33 trillion to $4.36 trillion in nominal terms,[7] real wages fell around 5%,[8] while the country experienced a stagnant price level.[9] In 2024 the country entered a technical recession which caused it to lose its position as the world’s third largest economy to Germany.[10][11][12]
While there is some debate on the extent and measurement of Japan's setbacks,[13][14] the economic effect of the Lost Decades is well established, and Japanese policymakers continue to grapple with its consequences.
Causes
Trying to deflate speculation and keep
Eventually, many of these failing firms became unsustainable, and a wave of consolidation took place, resulting in four national banks in Japan. Many Japanese firms were burdened with heavy debts, and it became very difficult to obtain credit. Many borrowers turned to sarakin (loan sharks) for loans. As of 2012, the official interest rate was 0.1%;[22] the interest rate has remained below 1% since 1994.[23]
Economic effects
Despite mild economic recovery in the 2000s, conspicuous consumption of the 1980s has not returned to the same pre-crash levels. Japanese firms such as Toyota, Sony, Panasonic, Sharp, and Toshiba, which had dominated their respective industries from the 1960s to the 1990s, had to fend off strong competition from rival firms based in other East Asian countries, particularly South Korea, and China, since the 2000s. In 1989, of the world's top 50 companies by market capitalization, 32 were Japanese; by 2018, only one such company (Toyota) remains in the top 50.[24] Many Japanese companies replaced a large part of their workforce with temporary workers, who had little job security and fewer benefits. As of 2009, these non-traditional employees made up more than a third of the labor force.[25] For the wider Japanese workforce, wages have stagnated. From their peak in 1997, real wages fell around 13% by 2013,[8] an unprecedented number among developed nations.[citation needed] Surveys by the Ministry of Health, Labour and Welfare showed that household income in 2010 had fallen to 1987 levels.[26] According to Teikoku Databank, Japan's largest credit rating agency, the aggregate sales of all companies in Japan decreased by 3.9% in 2010 compared to 2000, or a decrease of 13,848.2 billion yen.[27]
The wider economy of Japan is still recovering from the impact of the 1991 crash and subsequent lost decades. It took 12 years for Japan's GDP to recover to the same levels as 1995. And as a greater sign of economic malaise, Japan also fell behind in output per capita. In 1991, real output per capita in Japan was 14% higher than that of Australia, but in 2011 real output had dropped to 14% below Australia's levels.
In response to chronic deflation and low growth, Japan has attempted economic stimulus and thereby run a fiscal deficit since 1991.[30] These economic stimuli have had at best nebulous effects on the Japanese economy and have contributed to the huge debt burden on the Japanese government. Expressed as a percentage of GDP, at ~240% Japan had the highest level of debt of any nation on earth as of 2013.[30] While Japan's is a special case where the majority of public debt is held in the domestic market and by the Bank of Japan, the sheer size of the debt demands large service payments and is a worrying sign of the country's financial health.
More than 25 years after the initial market crash, Japan was still feeling the effects of Lost Decades. However, several Japanese policymakers have attempted reforms to address the malaise in the Japanese economy. After
In early 2020, as Japan began to suffer from the COVID-19 pandemic, Jun Saito of the Japan Center for Economic Research stated that the pandemic's impact delivered the "final blow" to Japan's long fledgling economy, which had resumed slow growth in 2018.[34]
Interpretation
Economist Paul Krugman has argued that Japan's lost decades are an example of a liquidity trap (a situation in which monetary policy is unable to lower nominal interest rates because it is already close to zero). He explained how truly massive the asset bubble was in Japan by 1990, with a tripling of land and stock market prices during the prosperous 1980s. Japan's high personal savings rates, driven in part by the demographics of an aging population, enabled Japanese firms to rely heavily on traditional bank loans from supporting banking networks, as opposed to issuing stock or bonds via the capital markets to acquire funds. The cozy relationship of corporations to banks and the implicit guarantee of a taxpayer bailout of bank deposits created a significant moral hazard problem, leading to an atmosphere of crony capitalism and reduced lending standards. In so doing they helped inflate the bubble economy to grotesque proportions." The Bank of Japan began increasing interest rates in 1990 due in part to concerns over the bubble and in 1991 land and stock prices began a steep decline, within a few years reaching 60% below their peak.[17]
Economist
Economist Scott Sumner has argued that Japan's monetary policy was too tight during the Lost Decades and thus prolonged the pain felt by the Japanese economy.[37][38][39][40]
Economists
In her analysis of Japan's gradual path to economic success and then quick reversal, Jennifer Amyx wrote that Japanese experts were not unaware of the possible causes of Japan's economic decline. Rather, to return Japan's economy back to the path to economic prosperity, policymakers would have had to adopt policies that would first cause short-term harm to the Japanese people and government.[
Legacy
After the
See also
- 1997 Asian financial crisis
- Economic history of Japan
- Economic stagnation
- Employment Ice Age
- Great Recession
- Japanese post-war economic miracle
- Princes of the Yen: book by Richard Werner about the macroeconomics behind the Lost Decade
- Zero interest rate policy
References
- ^ "Hayashi Prescott" (PDF).
- ^ Leika Kihara (August 17, 2012). "Japan eyes end to decades long deflation". Reuters. Retrieved September 7, 2012.
- ^ "円は一段と上昇か、日本は次の失われた10年に直面-ムーディーズ". Bloomberg.com (in Japanese). 17 June 2016. Retrieved 2020-10-18.
- ^ a b c "「失われた30年」に向かう日本". Newsweek日本版 (in Japanese). 2010-12-23. Retrieved 2020-10-18.
- ^ "「失われた30年」となる可能性も 次の10年を考えて投資しよう". MONEYzine (in Japanese). Retrieved 2020-10-18.
- ^ Nielsen, Barry. "The Lost Decade: Lessons From Japan's Real Estate Crisis". Investopedia. Retrieved 2020-05-26.
- ^ "Japanese GDP, nominal".
- ^ a b "Waging a New War". March 9, 2013.
- ^ "Inflation Japan - CPI inflation".
- ^ Montgomery, Hanako; He, Laura (15 February 2024). "Japan slips into recession, allowing Germany to overtake as world's third-largest economy". CNN.
- ^ McCurry, Justin (15 February 2024). "Japan loses crown as world's third-largest economy after it slips into recession". The Guardian.
- ^ Yokoyama, Erica (February 14, 2024). "Japan Loses Its Spot as World's Third-Largest Economy as It Slips Into Recession". Bloomberg.
- ^ Fingleton, Eamonn (January 6, 2012). "The Myth of Japan's Failure". The New York Times.
- ^ Fingleton, Eamonn (January 12, 2012). "Video interview on BBC News with Eamonn Fingleton". BBC News, 5 min. 26 sec.
- ^ ISBN 978-1-4039-2074-4.
- ^ .
- ^ ISBN 978-0-393-07101-6.
- ^ "Japan Raised Interest Rates". Reuters via The New York Times. December 25, 1989.
- ^ Princes of the Yen. Japan's Central Bankers and the Transformation of the Economy. quantumpublishers.com. 2003.
- ^ Onaran, Yalman (2011-11-25). "Kill the zombie banks!". Salon Media Group. Retrieved 2013-01-16.
- ^ Schuman, Michael (2008-12-19). "Why Detroit Is Not Too Big to Fail". Time Inc. Retrieved 2008-12-23.
- ^ Ohno, Kenichi. "Economic Development of Japan". National Graduate Institute for Policy Studies. Retrieved 3 April 2011.
- ^ "Bank of Japan Interest Rates".
- ^ "昭和という「レガシー」を引きずった平成30年間の経済停滞を振り返る". ダイヤモンド・オンライン (in Japanese). 20 August 2018. Retrieved 2020-10-18.
- ^ Tabuchi, Hiroko (2009-02-22). "When Consumers Cut Back: An Object Lesson From Japan". The New York Times. Retrieved 2010-05-11.
- ^ "世帯所得、昭和に逆戻り…10年平均538万円". 日本経済新聞 電子版 (in Japanese). 5 July 2012. Retrieved 2020-10-18.
- ^ 田中秀臣 『日本経済復活が引き起こすAKB48の終焉』 主婦の友社、2013年、84頁。
- ^ "The Japanese Tragedy". The Economist Blog.
- ^ "労働生産性の国際比較 | 調査研究・提言活動". 公益財団法人日本生産性本部 (in Japanese). Retrieved 2023-10-17.
- ^ a b "Don't Mention the Debt". May 4, 2013.
- ^ "The third arrow". June 28, 2014.
- ^ "Inflation in Japan rises to 30-year high". June 27, 2014. Archived from the original on 2022-01-12.
- ^ "Over 70% of Japanese not feeling benefits of Abenomics". AFP. 27 January 2014. Archived from the original on 2 February 2014. Retrieved 28 January 2014.
- ^ Huang, Eustance (7 April 2020). "Japan's economy has been dealt the 'final blow' by the coronavirus pandemic, says analyst". CNBC. Retrieved 7 April 2020.
- ISBN 978-0-470-82494-8.
- ^ White, Gregory. "Richard Koo's Awesome Presentation On The Real Reason Why This Recession Is Completely Different". Business Insider.
- ^ Sumner, Scott. "Why Japan's QE didn't "work"". The Money Illusion. Retrieved November 24, 2014.
- ^ Sumner, Scott. "More evidence that the BOJ is not trying to create inflation". The Money Illusion. Retrieved November 24, 2014.
- ^ Sumner, Scott. "Rooseveltian Resolve". The Money Illusion. Retrieved November 24, 2014.
- ^ Sumner, Scott. "The other money illusion". The Money Illusion. Retrieved November 24, 2014.
- .
- doi:10.5089/9781451934359.023.A005 (inactive 31 January 2024).)
{{cite journal}}
: CS1 maint: DOI inactive as of January 2024 (link - ^ Amyx, Jennifer (2004). Japan's Financial Crisis: Institutional Rigidity and Reluctant Change. Princeton University Press. pp. 17–18.
- ^ Lustick, Ian (2011). "Institutional Rigidity". Cliodynamics. 2 (2).
- ^ Meckler, Laura; Weisman, Jonathan (2009-02-10). "Obama Warns of 'Lost Decade'". The Wall Street Journal.
- ^ The Seven Faces of 'The Peril' Federal Reserve Bank of St. Louis
Further reading
- Fletcher III, W. Miles, and Peter W. von Staden, eds. Japan's 'Lost Decade': Causes, Legacies and Issues of Transformative Change (Routledge, 2014)
- Funabashi, Yoichi, and Barak Kushner, eds. Examining Japan's Lost Decades (Routledge, 2015) excerpt
- Hayashi, Fumio, and Edward C. Prescott. "The 1990s in Japan: A lost decade." Review of Economic Dynamics (2002) 5#1 pp: 206–235. online
- Hoshi, Takeo, and Anil K. Kashyap. "Will the US and Europe avoid a lost decade? Lessons from Japan’s postcrisis experience." IMF Economic Review 63.1 (2015): 110–163. online