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Japan's Financial Crisis and Economic Stagnation

Japan's Financial Crisis and Economic Stagnation Abstract We survey the macroeconomic stagnation and financial problems in Japan. The financial sector assessment includes separate analyses of the commercial banks, the life insurance companies and the government's fiscal investment and loan program (FILP). We estimate that the Japanese taxpayer will have to pay at least another ¥100 trillion (20% of GDP) to cover financial system losses. We explain how the current dysfunctional Japanese banking system misallocates funds by keeping many insolvent firms in business. These inefficient firms crowd out potentially profitable ones and worsen macroeconomic stagnation. A sustained macroeconomic recovery requires serious restructuring aimed at stopping this cycle. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

Japan's Financial Crisis and Economic Stagnation

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References (49)

Publisher
American Economic Association
Copyright
Copyright © 2004 by the American Economic Association
Subject
Symposia
ISSN
0895-3309
DOI
10.1257/089533004773563412
Publisher site
See Article on Publisher Site

Abstract

Abstract We survey the macroeconomic stagnation and financial problems in Japan. The financial sector assessment includes separate analyses of the commercial banks, the life insurance companies and the government's fiscal investment and loan program (FILP). We estimate that the Japanese taxpayer will have to pay at least another ¥100 trillion (20% of GDP) to cover financial system losses. We explain how the current dysfunctional Japanese banking system misallocates funds by keeping many insolvent firms in business. These inefficient firms crowd out potentially profitable ones and worsen macroeconomic stagnation. A sustained macroeconomic recovery requires serious restructuring aimed at stopping this cycle.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: Mar 1, 2004

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