Title: The Lost Decade: Lessons From Japan's Real Estate Crisis
Headings: The Lost Decade: Lessons From Japan's Real Estate Crisis
The Lost Decade: Lessons From Japan's Real Estate Crisis
What Was Japan's "Lost Decade" Real Estate Crisis?
Understanding Japan's "Lost Decade" Real Estate Crisis
Japan's Lost Decade
Key Takeaways
The Bank of Japan's Interest Rate Mistakes
A Liquidity Trap
Breaking Out of a Liquidity Trap
Credit Crunch
Solutions to a Credit Crunch
Article Sources

Content: While the Japanese economy outgrew this period, it did so at a much slower pace than other industrialized nations. During this period, the Japanese economy suffered from both a credit crunch and a liquidity trap . Understanding Japan's "Lost Decade" Real Estate Crisis
Japan's Lost Decade
Japan's economy was the envy of the world in the 1980s—it grew at an average annual rate (as measured by GDP) of 3.89% in the 1980s, compared to 3.07% in the United States. 1 ﻿ But Japan's economy ran into troubles in the 1990s. From 1991 to 2003, the Japanese economy, as measured by GDP, grew only 1.14% annually, well below that of other industrialized nations. 1 ﻿
Key Takeaways
Japan's "Lost Decade" was a period that lasted from about 1991 to 2001 that saw a great slowdown in Japan's previously bustling economy. The main causes of this economic slowdown were raising interest rates that set a liquidity trap at the same time that a credit crunch was unfolding. The major lessons economies can take from Japan's "Lost Decade" include using available public funds to restructure banks' balance sheets and that sometimes the fear of inflation can cause stagnation. Japan's equity and real estate bubbles burst starting in the fall of 1989. Equity values plunged 60% from late 1989 to August 1992, 2 ﻿ while land values dropped throughout the 1990s, falling an incredible 70% by 2001.