Title: Lost Decade (Japan) - Wikipedia
Headings: Lost Decade (Japan)
Lost Decade (Japan)
Contents
Causes
Effects
Interpretation
Legacy
See also
References
Further reading

Content: While there is some debate on the extent and measurement of Japan's setbacks, the economic effect of the Lost Decades is well established, and Japanese policymakers continue to grapple with its consequences to little economic effect. Contents
1 Causes
2 Effects
3 Interpretation
4 Legacy
5 See also
6 References
7 Further reading
Causes
Japan's strong economic growth in the second half of the 20th century ended abruptly at the start of the 1990s. 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 bubble was caused by the excessive loan growth quotas dictated on the banks by Japan's central bank, the Bank of Japan, through a policy mechanism known as the "window guidance". As economist Paul Krugman explained, "Japan's banks lent more, with less regard for quality of the borrower, than anyone else's. In doing so they helped inflate the bubble economy to grotesque proportions." Nikkei 225 annual closing price saw the price sliding from 1990 onwards
Trying to deflate speculation and keep inflation in check, the Bank of Japan sharply raised inter-bank lending rates in late 1989. This sharp policy caused the bursting of the bubble, and the Japanese stock market crashed. Equity and asset prices fell, leaving overly-leveraged Japanese banks and insurance companies with books full of bad debt. 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.