On the Historical Significance and the Social Costs of the Sub-Prime Financial Crisis: Drawing on the Japanese Experience

The financial turmoil that started in the USA in August 2007 has become a global financial crisis, battering the real economy of developed countries, and fast becoming a world economic crisis. The term �sub-prime financial crisis� is used in this paper to capture this entire process. Its historical significance is examined below in three separate but related ways. Section 1 considers the specific features of the subprime crisis particularly in comparison with the Japanese bubble of the 1980s and the ensuing crisis of the 1990s. Section 2 pursues the comparison further by discussing briefly the great depression that followed after 1929, and suggests reasons why the current crisis might not be equally severe. Finally, section 3 probes into the social costs of the crisis.