This volume explores the origins of Japan's current economic crisis and assesses the country's prospects for recovery. * An exploration of the origins and consequences of Japan's current economic crisis. * Examines the collapse of the equity and real estate market bubbles in the late 1980s.

1. The Bubble and the Lost Decade: Gary R. Saxonhouse and Robert M. Stern (both University of Michigan). 2. Retrospective on the Bubble Period and its Relationship to Developments in the 1990s: Takatoshi Ito (University of Tokyo). 3. Why Does the Problem Persist? ‘Rational Rigidity’ and the Plight of Japanese Banks: Kiyohiko G. Nishimura (University of Tokyo) and Yuko Kawamoto (McKinsey & Company, Japan). 4. Japan’s Fiscal Policies in the 1990s: Toshihiro Ihori (University of Tokyo), Toru Nakazato (Sophia University, Tokyo), and Masumi Kawade (University of Tokyo). 5. Japan’s Negative Risk Premium in Interest Rates: The Liquidity Trap and the Fall in Bank Lending: Rishi Goyal (International Monetary Fund) and Ronald McKinnon (Stanford University). 6. Japan’s Lost Decade and its Financial System: Mitsuhiro Fukao (Keio University, Tokyo). Index.

After decades of growth, Japan now faces an economic crisis. This volume examines the origins of Japan’s current economic difficulties, particularly the collapse of the equity and real estate market bubbles in the late 1980s. It looks at the link between these price shocks, the downturn in economic growth and the onset of deflation, and analyses the failure of Japanese monetary and fiscal policies to reverse the decline. Various policy options are explored, but the volume concludes that the prospects for Japan’s economic recovery are still uncertain because of the lack of political will to adopt the measures necessary for overcoming the ‘lost decade’.