'Lost Decade'? In Translation: What Japan's Crisis Could Portend About Recovery from the Great Recession

41 Pages Posted: 5 Jan 2010

See all articles by Murtaza H. Syed

Murtaza H. Syed

International Monetary Fund (IMF)

Kiichi Tokuoka

affiliation not provided to SSRN

Kenneth Kang

International Monetary Fund (IMF)

Date Written: December 2009

Abstract

Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan's growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan's experiences suggest four broad lessons. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. Third, well-calibrated macroeconomic stimulus can facilitate this adjustment, but carries increasing costs. And fourth, while judging the best time to exit from policy support is difficult, clear medium-term plans may help.

Keywords: Banking crisis, Banking sector, Central bank policy, Demand, Economic recovery, Financial crisis, Fiscal policy, Global Financial Crisis 2008-2009, International financial system, Japan, Liquidity management, Monetary policy, Private sector, Public investment

Suggested Citation

Syed, Murtaza H. and Tokuoka, Kiichi and Kang, Kenneth, 'Lost Decade'? In Translation: What Japan's Crisis Could Portend About Recovery from the Great Recession (December 2009). IMF Working Paper No. 09/282, Available at SSRN: https://ssrn.com/abstract=1531515

Murtaza H. Syed (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kiichi Tokuoka

affiliation not provided to SSRN

Kenneth Kang

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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