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Debt, Deflation and Declining Growth: New Challenges to the Japanese Economy

In: Structural Reform and Economic Policy

Author

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  • Takatoshi Ito

    (University of Tokyo)

Abstract

The Japanese economy was an envy of the world at the end of 1980s for its strong output activity, rising equity prices, stable consumer prices and apparent financial might. However, after the ‘lost decade’ of the 1990s, Japan has become an economy upon which many countries are averse to model themselves. Stock and land prices have been declining since 1990, and real estate prices have fallen to about one- quarter of their peak level. Non-performing loans are mounting and, after several years of capital injection and blanket deposit guarantees, the banking crisis is not completely over. Most Japanese banks are under severe pressure to raise more capital, after losing much in writing off losses from non-performing loans. The economic growth rate was quite low during the 1990s. Prices and wages have been generally declining since the late 1990s and deflation seems to have set in.

Suggested Citation

  • Takatoshi Ito, 2004. "Debt, Deflation and Declining Growth: New Challenges to the Japanese Economy," International Economic Association Series, in: Robert M. Solow (ed.), Structural Reform and Economic Policy, chapter 8, pages 131-170, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-0-230-52444-6_8
    DOI: 10.1057/9780230524446_8
    as

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