Japan’s Financial Crisis and Economic Stagnation

Sorting Out Japan’s Financial Crisis

This paper makes three contributions. First, I report information on the size of the Japanese financial crisis. Drawing principally on work by Fukao (2003) and Doi and Hoshi (2003) I estimate that the current taxpayer liability for losses incurred but yet to be recognized is likely to be at least 24% of GDP. Second, I explain why it has been so difficult to end the crisis. Third, I sketch the l...

Japan’s Saving, Financial Linkages, and Capital Mobility in East Asia before the 1997-98 Currency Crisis: An Empirical Investigation

I examine financial linkages in East Asia before the 1997-98 crisis by testing long-run and causal relationships between Japan’s saving and eight other Asian economies’ domestic investment. The results suggest that there is a long-run (cointegrating) relationship between Japan’s saving and the domestic investments of four of the five crisis economies and Taiwan. There is also evidence that Japa...

The Causes of Japan’s Financial Crisis

Secular stagnation, debt overhang and other rationales for sluggish growth, six years on

There is considerable controversy over why sluggish economic growth persists across many advanced economies six years after the onset of the financial crisis. Theories include a secular deficiency in aggregate demand, slowing innovation, adverse demographics, lingering policy uncertainty, post-crisis political fractionalisation, debt overhang, insufficient fiscal stimulus, excessive financial r...

Japan Now and the United States Then: Lessons from the Parallels

For much of the last decade, Japan’s banking crisis has been at the center of attention in the ongoing discussion of that country’s broader economic difficulties and of what public policy actions could alleviate them. The enormous loan losses and balance sheet erosion that nearly all Japanese banks have sustained during this period, and the resulting impairment of their ability to carry out ord...