The Causes of Japan's "Lost Decade": The Role of Household Consumption
47 Pages Posted: 20 Jul 2006 Last revised: 5 Sep 2022
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The Causes of Japan's Lost Decade: The Role of Household Consumption
Date Written: April 2006
Abstract
In this paper, I analyze the causes of the prolonged slowdown of the Japanese economy in the 1990s and find that the stagnation of investment, especially private fixed investment, was the primary culprit. I then investigate the causes of the stagnation of household consumption during the 1990s and find that the stagnation of household disposable income, the decline in household wealth, and increased uncertainty about the future are among the contributing factors. Finally, I consider whether demand side factors or supply side factors were more important as causes of the prolonged slowdown of the Japanese economy in the 1990s and conclude that the former (especially misguided government policies) were probably more important.
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