Japan's Financial Crisis and Economic Stagnation
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Open Access
- 1 February 2004
- journal article
- Published by American Economic Association in Journal of Economic Perspectives
- Vol. 18 (1) , 3-26
- https://doi.org/10.1257/089533004773563412
Abstract
We survey the macroeconomic stagnation and financial problems in Japan. The financial sector assessment includes separate analyses of the commercial banks, the life insurance companies and the government's fiscal investment and loan program (FILP). We estimate that the Japanese taxpayer will have to pay at least another ¥100 trillion (20% of GDP) to cover financial system losses. We explain how the current dysfunctional Japanese banking system misallocates funds by keeping many insolvent firms in business. These inefficient firms crowd out potentially profitable ones and worsen macroeconomic stagnation. A sustained macroeconomic recovery requires serious restructuring aimed at stopping this cycle.Keywords
This publication has 3 references indexed in Scilit:
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- The Bubble and the Lost DecadeThe World Economy, 2003
- The 1990s in Japan: A Lost DecadeReview of Economic Dynamics, 2002