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The Causes of Japan's "Lost Decade": The Role of Household Consumption

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  • Charles Yuji Horioka

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12142.

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Date of creation: Apr 2006
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Publication status: published as Horioka, Charles Yuji, 2006. "The causes of Japan's `lost decade': The role of household consumption," Japan and the World Economy, Elsevier, vol. 18(4), pages 378-400, December.
Handle: RePEc:nbr:nberwo:12142

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Cited by:
  1. Muellbauer, John & Murata, Keiko, 2009. "Consumption, Land Prices and the Monetary Transmission Mechanism in Japan," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7269, C.E.P.R. Discussion Papers.
  2. Kurita, Takamitsu, 2010. "Co-breaking, cointegration, and weak exogeneity: Modelling aggregate consumption in Japan," Economic Modelling, Elsevier, Elsevier, vol. 27(2), pages 574-584, March.
  3. Miki Kohara & Charles Yuji Horioka, 2006. "Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0663, Institute of Social and Economic Research, Osaka University.
  4. Somphoom Sawaengkun Author_Email: somphoom@yahoo.com, 2011. "Household Consumption And Old-Age Population: Empirical Study For Thailand And Japan," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding, Conference Master Resources 2011-015-136, Conference Master Resources.
  5. Charles Yuji Horioka, 2012. "Recent Trends in Consumption in Japan and the Other Group of Seven (G7) Countries," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0861, Institute of Social and Economic Research, Osaka University.
  6. Masahiko Shibamoto & Ryuzo Miyao, 2008. "Understanding Output and Price Dynamics in Japan: Why Have Japan's Price Movements Been Relatively Stable Since the 1990s?," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University 219, Research Institute for Economics & Business Administration, Kobe University.
  7. Alan J. Auerbach & William G. Gale, 2009. "Activist Fiscal Policy to Stabilize Economic Activity," NBER Working Papers 15407, National Bureau of Economic Research, Inc.
  8. Atsuo Utaka, 2014. "Consumer Confidence and the Japanese Economy -Comparison of Pre- and Post-Bubble Period-," Economics Bulletin, AccessEcon, vol. 34(2), pages 1165-1173.
  9. Rod Tyers & Ying Zhang, 2011. "Japan's Economic Recovery: Insights from Multi-Region Dynamics," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 11-13, The University of Western Australia, Department of Economics.
  10. Kiichi Tokuoka, 2010. "Rebalancing in Japan," IMF Working Papers 10/293, International Monetary Fund.
  11. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  12. Maito, Esteban Ezequiel, 2014. "Auge y estancamiento de Japón (1955-2008). Una explicación marxista
    [Rise and standstill of Japan (1955-2008). A Marxist explanation]
    ," MPRA Paper 53102, University Library of Munich, Germany.

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