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The Economics of Japan’s Stagnation

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Abstract

The Japanese economy has been mired in subdued growth and deflation for more than two decades. This paper describes the key economic facts and features of Japan’s decades of stagnation. It discusses why long-term Japanese government bonds’ nominal yields have stayed very low in spite of elevated government debt ratios and chronic fiscal deficits. It also provides a brief overview of Abenomics and recent economic developments in Japan.

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Notes

  1. These include Bernanke [2000 and 2002], Eggertsson and Krugman [2010], Hayashi and Prescott [2002], Koo [2008], Krugman [1998a and 1998b], Posen [2010], and Uedo [2012].

  2. Shades in the figures denote the periods of official recessions in Japan.

  3. The Plaza Accord of 1985 was followed by the Lourve Accord of 1987. It tried to stall the continued depreciation of the U.S. dollar against other major currencies that occurred after the signing of the Plaza Accord. Although it temporarily reversed the appreciation of the Japanese yen, it was unable to prevent its continued appreciation and its persistent overvaluation in subsequent years.

  4. A Gini Coefficient of zero means that everyone in the economy has the same income, whereas a Gini Coefficient of one means that only one person has all the income in the economy.

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Acknowledgements

The author thanks Tavis Barr, Michael Berumen, André Burgstaller, Ming Yu Cheng, Jack Clontz, Anupam Das, Sergio Godoy, Michael Hudson, Nazrul Islam, Haider Khan, Doug Korty, Boram Lee, Kevin Moose, Rob Parenteau, Rob Robis, Anuranjan Sharma, Jeremy Wohlberg, and two anonymous referees of this journal for their comments on earlier versions of this paper and Thomas Minarcine for his research assistance. The standard disclaimer holds.

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  1. Tanweer Akram
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*Tanweer Akram is Vice President/Senior Economist at Voya Investment Management, where he works for its Fixed Income Research department in Atlanta, GA. He is responsible for developing the firm’s U.S. and global macroeconomic and rates outlook and for identifying key economic risks to the outlook. He has previously worked for Moody’s Analytics, the World Bank, and A.T. Kearney. He has also taught at Columbia University and North South University in Bangladesh. He received his Ph.D., degree in economics from Columbia University and his Master’s degree in economics from the London School of Economics. He obtained his Bachelor of Arts in economics from Grinnell College.

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Akram, T. The Economics of Japan’s Stagnation. Bus Econ 49, 156–175 (2014). https://doi.org/10.1057/be.2014.19

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