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Paper Topic:

The causes of “bubble economy” in Japan in the late 1980s and the government’s attempts to remedy them: a critical analysis

Japan 's Bubble Economy : the Rise , the Fall and the Lessons after the Burst


I . Abstract

II . Introduction

III . The Definition and Cause of the Bubble Economy

A . What is the Bubble Economy

B . The Cause

IV . The Aftermath of the Burst Bubble

V . What the Japanese Government Do to Remedy the Situation

VI . Conclusion

Japan 's Bubble Economy : the Rise , the Fall and the Lessons after the Burst


The rise of the 'bubble ' economy during the second half of the 1980s was

characterized by a speculative boom in asset prices and its eventual collapse at the beginning of the nineties proved to be detrimental to Japan 's financial and business sectors . The aftermath of the 'bubble including the severe banking crisis , caused the monetary authorities to introduce important administrative and financial reforms . This rounds up the reasons behind the rise of the so-called `bubble economy why Japan was not able to sustain the `bubble ' and how it affected the downturn of the economy in Japan after the bubble burst . The conclusion about the bubble and its burst have revealed fundamental problems in Japan 's economic and financial system . Japan 's financial bureaucrats blindly ignored the obvious collapse of the bubble , simply because they had already decided to pursue fiscal austerity . The stagnation of the Japanese economy is due to an exceptionally long-term shortage of aggregate demand . Apart from the lessons learned about the financial deterioration that the bubble economy had brought up , it is important to consider the roots of how the rise and fall of the bubble economy grew in Japan to avoid committing the same mistakes that almost threatened Japan 's economic security


Below par performance of the economy , an annual growth rate of Gross Domestic Product (GDP ) nailed at 0 .5 percent and some ridiculously high rates of bankruptcies . This was the characteristics of a strange phenomenon in Japan 's financial sector from 1991 to 1999 . After steady catch-up for 35 years rising from the ashes of the World War II , Japan 's economy did not only stop catching up , but lost ground relative to its potential to become an industrial leader around the world . Everything just slowed down in the late 1990s after enjoying a short span of a bubble economy

In the wake of the economic conflicts between Japan and the USA and Europe in the 1980s , the growth of East Asia as a market as well as a production platform , and the general rise in the value of the yen during the past decade , which has made investments in neighboring countries especially attractive , many Japanese businesses have forged ahead with strategic investments in the three core regions of the global economy The major boost in Japanese foreign direct investment (FDI ) following the Plaza Accord of 1985 reached a peak in 1989 , at the height of the Japanese bubble economy , and then fell back in the early 1990s after the bursting of the bubble (Harukiyo Hook , 1998 ,

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