Nostalgia strikes back

In the 1990s, the Japanese economy suffered a prolonged recession that followed the collapse of the fabled economic bubble of the 1980s. This stretch of economic stagnation, the “lost decade,” finally ended in 2002; it had taken more than 10 years, punctuated with occasional “false dawns,” to pull up the economy. Some abrupt economic crises outside Japan – including the Asian currency crisis in 1997 and the Mexican default in 1994 – and too-early exit strategies from revitalization efforts by the government and Bank of Japan attributed some to the stagnation especially in the late 1990s, but these factors do not tell the whole story. The conventional wisdom is that two factors prevented the Japanese economy from getting out of the deep hole created by the bursting bubble.