Japan's Lost Decades

What you'll learn

• ✓Describe the 1980s twin bubble
• ✓Explain zombie banks and evergreening
• ✓Link Japan to modern QE

Lessons

1. 🎆
   The Last Trading Day of the 80s

   December 29, 1989
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2. The Plaza Accord and Easy Money

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3. The Everything Bubble

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4. Popping It

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5. The Laboratory

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6. Final Boss: Thirty-Four Years

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Nikkei Index Sets First Record High Since 1989
  Nippon.com (Nikkei index data) · data
  Source for the December 29, 1989 peak (38,915.87 close, 38,957.44 intraday), the March 10, 2009 post-bubble closing low of 7,054.98, and the February 22, 2024 record close of 39,098.68, used in lessons 1, 4, and 6.
  https://www.nippon.com/en/japan-data/h01927/
• The Basic Discount Rate and Basic Loan Rate (historical series)
  Bank of Japan · institutional
  Primary source for the official discount rate path: cuts to 2.5 percent by February 1987, the hold to May 1989, and the five hikes to 6.0 percent by August 1990, used in lessons 2 and 4.
  https://www.boj.or.jp/en/statistics/boj/other/discount/discount.htm
• (Reference) Unconventional Monetary Policy Measures from the Late 1990s
  Bank of Japan · institutional
  Primary source for the zero interest rate policy (February 1999) and quantitative easing (March 2001 to March 2006), used in lessons 5 and 6.
  https://www.boj.or.jp/en/mopo/outline/bpreview/ref.htm
• The Plaza Accord, 30 Years Later (working paper, 2015)
  Jeffrey Frankel, Baker Institute / NBER · academic
  Source for the September 22, 1985 Plaza Accord, its participants, and the dollar's fall from about 240 to about 150 yen, used in lesson 2.
  https://www.bakerinstitute.org/sites/default/files/2015-09/import/WorkingPaper-Plaza-Frankel-092815.pdf
• Monetary Policy in the 1990s: Bank of Japan's Views Summarized
  Institute for Monetary and Economic Studies, Bank of Japan · institutional
  BoJ-affiliated account of the tightening of 1989 to 1990 and the policy debates of the lost decade, used in lessons 4 and 5.
  https://www.imes.boj.or.jp/research/papers/english/me38-3.pdf
• Zombie Lending and Depressed Restructuring in Japan (American Economic Review, 2008)
  Ricardo Caballero, Takeo Hoshi, Anil Kashyap · academic
  The reference study on evergreening and zombie firms, source for the claim that zombie-dense sectors saw depressed investment and job creation, used in lesson 5.
• The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession (2008)
  Richard C. Koo, Wiley · book
  Source for the balance sheet recession concept and the argument that fiscal policy sustained demand while private balance sheets healed, used in lesson 5.
• Japan's Lost Decade (1992)
  International Banker, History of Financial Crises series · article
  Source for the roughly 300 percent rise in six-major-city commercial land prices to 1991 and the roughly 70 percent subsequent decline (Japan Real Estate Institute index figures), used in lessons 3 and 4.
  https://internationalbanker.com/history-of-financial-crises/japans-lost-decade-1992/
• Japan in the 1980s: when Tokyo's Imperial Palace was worth more than California
  South China Morning Post · article
  Source for the Imperial Palace vs California comparison as a reported peak-era claim, the roughly 139,000 dollars per square foot Ginza figure, and the 3 million dollar golf memberships, used in lessons 1 and 3.
  https://www.scmp.com/magazines/style/news-trends/article/3091222/japan-1980s-when-tokyos-imperial-palace-was-worth-more
• Japanese monetary policy: 1998-2005 and beyond (BIS Papers No 31)
  Takatoshi Ito, Bank for International Settlements · academic
  Academic account of ZIRP and QE design and effects, backing the deflation and policy narrative in lesson 5.
  https://www.bis.org/publ/bppdf/bispap31i.pdf