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Japan's Lost Decade: What Have We Learned and Where Are We Heading?

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  • Hiroshi YOSHIKAWA

Abstract

The lost decade has provided us a number of lessons. One of them is the limit of standard macroeconomics. This paper attempts to show that uncertainty plays a much more important role in the macroeconomy than most economists recognize. Once the economy is caught in an uncertainty trap, the effectiveness of standard policy necessarily weakens. The zero‐interest rate may well be a consequence of an uncertainty trap. In fact, whether or not the economy is caught in such an uncertainty trap distinguishes “depression” from the normal cyclical “recession.” The significance of demand‐creating innovation is another point I emphasize in this paper. In my view, a lack of demand‐creating innovation is a part of explanation of the lost decade. At the same time, this paper offers prospects for the future of the Japanese economy.

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  • Hiroshi YOSHIKAWA, 2007. "Japan's Lost Decade: What Have We Learned and Where Are We Heading?," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(2), pages 186-203, December.
    • Handle: RePEc:bla:asiapr:v:2:y:2007:i:2:p:186-203
    DOI: 10.1111/j.1748-3131.2007.00065.x
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    1. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
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    4. Vasilev, Aleksandar & Maksumov, Rashid, 2010. "Critical analysis of Chapter 23 of Keynes’s Notes on Mercantilism in The General Theory of Employment, Interest and Money (1936)," EconStor Research Reports 155318, ZBW - Leibniz Information Centre for Economics.
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    Cited by:

    1. Kurita, Takamitsu, 2011. "An empirical model for Japan's business fixed investment," Journal of Economics and Business, Elsevier, vol. 63(2), pages 107-120, March.
    2. Hiroshi Nishi, 2019. "An empirical contribution to Minsky’s financial fragility: evidence from non-financial sectors in Japan," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(3), pages 585-622.
    3. W. R. Garside, 2012. "Japan’s Great Stagnation," Books, Edward Elgar Publishing, number 14624.
    4. Hiroshi Nishi, 2016. "Sources and Consequences of Productivity Growth Dynamics: Is Japan Suffering from Baumol's Diseases?," Discussion papers e-16-003, Graduate School of Economics , Kyoto University.
    5. Kurita, Takamitsu, 2011. "An empirical model for Japan’s business fixed investment," Journal of Economics and Business, Elsevier, vol. 63(2), pages 107-120.
    6. Ryo Kato & Motohiro Okada, 2019. "Can Financial Support Reduce Suicide Mortality Rates?," IJERPH, MDPI, vol. 16(23), pages 1-11, November.
    7. Toshiki Hasegawa & Kouji Fukuyama & Motohiro Okada, 2021. "Relationships between Expenditure of Regional Governments and Suicide Mortalities Caused by Six Major Motives in Japan," IJERPH, MDPI, vol. 19(1), pages 1-18, December.

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