A review of the development of the Japanese economy from the 1990s until today suggests that uncertainty which affects economic entities' behavior exists endogenously in the market economy.
Since the early 1990s, the Japanese economy has been in a state of long-term stagnation (exceeding 10 years). Every market economy is susceptible to financial crisis and fluctuating business cycles, as evidenced by the United Kingdom in the first half of the 1970s, the Scandinavian countries around 1990, and the United States around 2000. However, there are few historic examples similar to the present condition of Japan, making it a problem involving the whole economic system (economic crisis).
Today, when examining the causes of long-term stagnation of the Japanese economy, it is said that the main concern is that households are unable to meet their living expenses due to the sense of unrest regarding pensions and future employment. In reality, however, the argument that connects the sense of unrest to the aggravation of business cycles in this way is more recent, and it did not become a common concern following the collapse of the bubble economy until 1997.
Such a change in consumer expenses and inappropriate government policies largely affected the plant and equipment investments of enterprises. Because no effective policies were implemented, asset prices, including stock prices, did not hit the bottom and were on a low level for a long time, leading to the stagnation of plant and equipment investments. Another factor that affected these investments was the actual growth rate of the economy falling repeatedly below the expected growth rate and enterprise managers' medium-term economic prospects became gradually pessimistic. |
