Part 8/16:
The Japanese Case Study: Lessons from a Stagnant Economy
The discussion next turns to Japan—a prime example of a debt-driven, stagnating economy with unique institutional features.
The 1980s Bubble: Japan experienced an enormous asset bubble fueled by easy credit, with Tokyo’s Imperial Palace once valued more than California's entire real estate market.
Post-bubble response: The Bank of Japan (BoJ) raised interest rates just as the bubble burst, precipitating a sharp decline in asset prices. Instead of fiscal stimulus, Japan largely relied on zero interest rates and Quantitative Easing (QE).
The consequences: