Real estate prices rose to such a high level that the land in Tokyo alone was worth more than all of the land in the United States. The people were shocked by the devastation and swung into action. The Plaza Accord doubled the exchange rate value of the US dollar versus the yen between 1985 and 1987, which fueled a speculative asset price bubble of a massive scale. The mid- and late-1980s were the years of Japan’s “bubble economy”, a time when the country was at its economic peak. With so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. However, several Japanese policymakers have attempted reforms to address the malaise in the Japanese economy. Banks started to take increasingly excessive risks that were partly funded by 186 trillion worth of Yen borrowed from various capital markets. From 1991 to 2003, the Japanese economy, as measured by GDP, grew only 1.14% annually, well below that of other industrialized nations., Japan's equity and real estate bubbles burst starting in the fall of 1989. Japanese cars had a 33% hold on the American automobile market at that time and then-current U.S. President Ronald Reagan waged a price war against the new Japanese automobiles. Without an accompanying change in institutional flexibility, Japan was unable to adapt to changing conditions and even though experts may have known which changes needed to be made, they would have been virtually powerless to enact those changes without instituting unpopular policies which would have been harmful in the short-term. The financial institutions were bailed out through capital infusions from the government, loans and cheap credit from the central bank, and the ability to postpone the recognition of losses, ultimately turning them into zombie banks. After two decades, Japan’s economy is still in the doldrums and their real estate prices have plummeted for just as long and are likely to continue falling in the future. The rise of an information-based economy was led by major research in highly sophisticated technology, such as advanced computers. In 2001, the Bank of Japan began to target the money supply instead of interest rates, which helped to moderate deflation and stimulate economic growth. However, when a central bank injects money into the financial system, banks are left with more money on hand, but also must be willing to lend that money out. As population growth slowed and the economy expanded, Japan faced a labour shortage that drew workers from agriculture, as well as from small and medium enterprises, to the new large-scale industries of … In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy. Accessed May 12, 2020. They might do this for a few reasons: they have no confidence that they can earn a higher rate of return by investing, they believe deflation is on the horizon (cash will increase in value relative to fixed assets), or deflation already exists. Everyone aged between twenty and sixty was a compulsory member of this Employee Pension Insurance Plan. After the moratorium on commercial whaling in 1986, Japanese government started its whaling for research purposes the following year. During this time, it was widely believed that Japanese electronics powerhouses Sony and Hitachi would eventually acquire Intel and IBM. The length of economic cycles (periods of expansion vs. contraction) can vary greatly. Retrieved May 30th, 2012 from "The 1990s in Japan: A lost decade. But even with a stable population Japan remained one of the world’s most densely populated countries. Wealthy Japanese tourists became an ever-present fixture in the high-end auction houses, art galleries and luxury boutiques of cities like New York and London. His son Akihito acceded to the throne in 1989, starting the Heisei era. This “bubble economy” was followed by a collapse in asset values, a reduced pace of real economic growth, banking problems, and deflation. Japan’s deteriorating competitive edge against other Asian exporters, including China and South Korea, and its steadily deflating stock and property prices during the 1990s and 2000s have resulted those decades being called “Lost Decades.” During this time, many unprofitable and debt-ridden companies were kept afloat through frequent government bailouts, leading to their nickname, “Zombie companies.” By 2004, residential real estate in Tokyo was only worth of 10% of its late 1980s peak, while the most expensive land in Tokyo’s Ginza business district had fallen back to just 1% of its 1989 level in the same year (Barsky, 2009). Hibari Misora, one of the most popular and best selling female pop artists in Japan, died on 24 June 1989. And as a greater sign of economic malaise, Japan also fell behind in output per capita. Equity and asset prices fell, leaving overly leveraged Japanese banks and insurance companies with books full of bad debt. One of the three transponders malfunctioned 2 months after launch (March 23, 1984) and a second transponder malfunctioned 3 months after launch (May 3, 1984), so the scheduled satellite broadcasting had to be hastily adjusted to test broadcasting on a single channel. Accessed May 12, 2020. The crisis was caused by economic sanctions set by the organization of Arab Petroleum Exporting Countries on countries that seemed to be supporting Israel during the 1973 Arab-Israeli War. Japan’s government and corporations are still suffering under the weight of crushing debt loads that have accumulated since the late 1980’s. The recessionary effects of the strengthened yen in Japan's export-dependent economy created an incentive for the expansionary monetary policies that led to the Japanese asset price bubble of the late 1980s. Understanding Japan's "Lost Decade" Real Estate Crisis Japan's Lost Decade. http://www.greekshares.com/japanese.php, Wikipedia (n.d.).
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