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

  • Charles Yuji Horioka

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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File URL: http://www.nber.org/papers/w12142.pdf
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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
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
Note: EFG PE
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  1. Zhou, Yanfei, 2003. "Precautionary saving and earnings uncertainty in Japan: A household-level analysis," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 192-212, June.
  2. Fumio Hayashi & Edward C. Prescott, 2000. "The 1990s in Japan: a lost decade," Working Papers 607, Federal Reserve Bank of Minneapolis.
  3. Murata, Keiko, 2003. "Precautionary Savings and Income Uncertainty: Evidence from Japanese Micro Data," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 21-52, October.
  4. Keiichiro Kobayashi & Masaru Inaba, 2006. "Business cycle accounting for the Japanese economy," 2006 Meeting Papers 313, Society for Economic Dynamics.
  5. Horioka, Charles Yuji & Watanabe, Wako, 1997. "Why Do People Save? A Micro-Analysis of Motives for Household Saving in Japan," Economic Journal, Royal Economic Society, vol. 107(442), pages 537-52, May.
  6. Adam S. Posen & Ryoichi Mikitani (ed.), 2000. "Japan's Financial Crisis and Its Parallels to U. S. Experience," Peterson Institute Press: Special Reports, Peterson Institute for International Economics, number sr13, January.
  7. Adam S. Posen & Ryoichi Mikitani (ed.), 2000. "Japan's Financial Crisis and Its Parallels to U. S. Experience," Peterson Institute Press: All Books, Peterson Institute for International Economics, number sr13, January.
  8. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
  9. Tamim Bayoumi, 1999. "The Morning After; Explaining the Slowdown in Japanese Growth in the 1990's," IMF Working Papers 99/13, International Monetary Fund.
  10. Albert Ando & Dimitrios Christelis & Tsutomu Miyagawa, 2003. "Inefficiency of Corporate Investment and Distortion of Savings Behavior in Japan," NBER Working Papers 9444, National Bureau of Economic Research, Inc.
  11. C. Y. Horioka & H. Fujisaki & W. Watanabe & T. Kouno, 2000. "Are Americans More Altruistic than the Japanese? A U.S.-Japan Comparison of Saving and Bequest Motives," International Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 1-31.
  12. Ando, Albert, 2002. "Missing Household Saving and Valuation of Corporations: Inquiry into Japanese National Accounts I," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 147-176, June.
  13. Saito, Makoto & Shiratsuka, Shigenori, 2003. "Precautionary Motives versus Waiting Options: Evidence from Aggregate Household Saving in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 1-20, October.
  14. Adam S. Posen, 1998. "Restoring Japan's Economic Growth," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 35, January.
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