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“Lost Decade” in Translation - What Japan’s Crisis could Portend about Recovery from the Great Recession

Author

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  • Kiichi Tokuoka
  • Murtaza H Syed
  • Kenneth H Kang

Abstract

Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan's growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan's experiences suggest four broad lessons. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. Third, well-calibrated macroeconomic stimulus can facilitate this adjustment, but carries increasing costs. And fourth, while judging the best time to exit from policy support is difficult, clear medium-term plans may help.

Suggested Citation

  • Kiichi Tokuoka & Murtaza H Syed & Kenneth H Kang, 2009. "“Lost Decade” in Translation - What Japan’s Crisis could Portend about Recovery from the Great Recession," IMF Working Papers 09/282, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/282
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    References listed on IDEAS

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    4. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212 National Bureau of Economic Research, Inc.
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    6. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
    7. Naohiko Baba & Motoharu Nakashima & Yosuke Shigemi & Kazuo Ueda, 2006. "The Bank of Japan's Monetary Policy and Bank Risk Premiums in the Money Market," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
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    11. MATSUURA Katsumi & HORI Masahiro, 2003. "Special Credit Guarantee and Restructuring of Small Firms(in Japanese)," ESRI Discussion paper series 050, Economic and Social Research Institute (ESRI).
    12. Kiichi Tokuoka, 2010. "The Outlook for Financing Japan's Public Debt," IMF Working Papers 10/19, International Monetary Fund.
    13. Fujiki, Hiroshi & Okina, Kunio & Shiratsuka, Shigenori, 2001. "Monetary Policy under Zero Interest Rate: Viewpoints of Central Bank Economists," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(1), pages 89-130, February.
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    Cited by:

    1. Lin, Justin Yifu & Doemeland, Doerte, 2012. "Beyond Keynesianism : global infrastructure investments in times of crisis," Policy Research Working Paper Series 5940, The World Bank.

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