what caused the lost decade 
while there is some agreement on the events that led up to and precipitated the lost decade the causes for japan s sustained economic woes are still being debated once the bubble burst and the recession took place why did persist through successive years and decades demographic factors such as japan s aging population and the geopolitical rise of china and other east asian competitors may be underlying non economic factors researchers have produced papers delineating possible reasons why the japanese economy sank into prolonged stagnation keynesian economists have offered several demand side explanations paul krugman opined that japan was caught in a liquidity trap consumers were holding onto their savings because they feared that the economy was about to get worse 4 other research on the subject analyzed the role played by decreasing household wealth in causing the economic crisis 5 japan s lost decade a 2017 book blames a vertical investment saving curve for japan s problems 6monetarist economists have instead pointed to japan s monetary policy before and during the lost decade as too restrictive and not accommodative enough to restart growth milton friedman wrote in reference to japan that the surest road to a healthy economic recovery is to increase the rate of monetary growth to shift from tight money to easier money to a rate of monetary growth closer to that which prevailed in the golden 1980s but without again overdoing it that would make much needed financial and economic reforms far easier to achieve 7despite these various attempts keynesian and monetarist views on japan s extended economic malaise generally fall short japan s government has engaged in repeated rounds of massive fiscal deficit spending the keynesian s solution to economic depression and expansionary monetary policy the monetarist prescription without notable success this suggests that either the keynesian and monetarist explanations or solutions or both are likely mistaken austrian economists have on the contrary argued that a period of extended economic stagnation is not inconsistent with japan s economic policies that throughout the period acted to prop up existing firms and financial institutions rather than letting them fail and allowing entrepreneurs to reorganize them into new firms and industries they point to the repeated economic and financial bailouts as a cause of rather than a solution to japan s lost decades 8