""Bubble" or "Boom"?: Investigation of the Japanese economy in the second-half of 1980s with the firm-level data from the "Corporate Enterprise Annual Statistics", as preparation for studying the "Lost Two Decades"" (in Japanese)

Using the firm-level data of the "Corporate Enterprise Annual Statistics (hojin kigyo tokei nenpo)", in this paper I investigate the capital investment behavior of Japanese firms. I focus on the second-half of 1980s, and begin what I anticipate will become a full-fledged study of corporate behavior and the Japanese economy during this period and the following so-called "Lost Two Decades." Of the Japanese economy in the second-half of 1980s, immediately after the time that is now commonly called "the Bubble Era," observers have rushed to criticize the investment behavior of firms and households as "bubbly". They have seldom looked at it squarely, much less subjected it to full-fledged economic study. Observers have tended to diagnose the next long-term stagnation era, called the "Lost Two Decades", as the aftereffect of that "bubbly" behavior. They have suggested a wide variety of prescriptions, and blamed the long-run stagnation of the Japanese economy on the haphazard enforcement of these prescriptions. The first aim of this paper is to pose questions about the basic premises of this conventional wisdom, and through detailed empirical investigation liberate readers from the spell cast by the expression of "the Bubble Era." The expression has led observers to pay excessive attention to land-related investment behavior and land-price fluctuations. Instead, I propose to call the era a "Capacity Investment Boom Era," and urge readers to focus instead on the investment in "capital assets other than land." With this background, readers should be better prepared for a serious study of the Japanese economy during this period. In addition, this paper critically examines two points. First, the validity of two assumptions that have played critical roles as the basic premise of the conventional wisdom: (1) that banks occupy the predominant position and play a defining role in the Japanese financial market; and (2) that firm behavior is strictly conditioned under the binding constraints of bank borrowing. Second, the aftereffects of the "Bubble", symbolized by bank's "bad loans" and firm's "excess capacity", have been the major cause of the long-run stagnation called the "Lost Two Decades". This paper, together with Miwa[2011c], shows that all those popular claims, using fuzzy but colorful expressions, are mostly hard to understand, and rarely provide understandable logical foundation or persuasive evidences. This will then enable readers to escape from their preoccupation with "the Bubble Era", and begin a more serious study of the period. In the Conclusion, I write as follows. "The Lost Two Decades" is a period when, getting blind drunk in "bubble talks", symbolized by such expressions and images as "bubble", "the Bubble Era", and "aftereffect or 'penalty' of the 'bubble'", observers have wasted time and energy, leaving the Japanese economy in the long-run stagnation. The basic aim and role of this paper is to lift the research and discussion, diagnosis and prescription about the Japanese economy out of such a long-lasting dreadful state. With this, liberated also from the basic stance of the dominant view and the conventional wisdom that have sought in "the Bubble Era" the cause of the long-term stagnation since the 1990s, we are well prepared for fully beginning the study and diagnosis of the "Lost Two Decades".