In the late 1980s, Japan experienced an economic bubble fueled by excessive speculation in real estate and stock markets. When this bubble burst in the early 1990s, it led to a severe economic downturn. The country faced a banking crisis as financial institutions struggled with non-performing loans from collapsed asset values.
Government responses included attempts to stimulate the economy through fiscal and monetary policies. However, these measures were not always effective, and structural issues in the economy, such as ailing banks and inefficient corporate practices, persisted. The prolonged economic slump contributed to deflation, where prices continuously fell, discouraging consumer spending and business investments.
The Lost Decade had profound social implications. Unemployment rates rose, and many companies faced financial difficulties. The younger generation, often referred to as the "Lost Generation," struggled to find stable employment opportunities. The country also faced demographic challenges with an aging population.
Japan's experience during the Lost Decade has had a lasting impact on economic policymaking and is often studied as a cautionary tale. It underscores the importance of addressing structural issues promptly, implementing effective policy measures, and learning from the mistakes of the past to prevent or mitigate prolonged economic downturns.
In summary, the Lost Decade in Japan refers to the period of economic stagnation during the 1990s, characterized by the bursting of the asset price bubble, a banking crisis, deflation, and persistent economic challenges. The repercussions of this period continue to influence economic discussions and policymaking.
