Japan in 1990s
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Japan in 1990s. Changes in political economy. Changes in political economy. Challenges to stability of equilibrium domestic socioeconomic or political problems external economic or security problems Changes of different magnitude adjustments in public policy changes in socioeconomic basis

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Japan in 1990s

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Japan in 1990s

Japan in 1990s

Changes in political economy


Changes in political economy

Changes in political economy

  • Challenges to stability of equilibrium

    • domestic socioeconomic or political problems

    • external economic or security problems

  • Changes of different magnitude

    • adjustments in public policy

    • changes in socioeconomic basis

    • changes in economic or political institutions

    • major shifts in two or three spheres


Bubble burst 1990 01 01

Bubble burst (1990-01-01)


Bubble burst 1990 01 011

Bubble burst (1990-01-01)

  • Massive stock and land price collapse

  • annual GDP growth rate around 1%

  • manufacturing productivity decreased

  • corporate bankruptcies

  • unemployment rate

  • economic performance at bottom of industrialized democracies

    • opposite from 1960s


Japan slows down

Japan slows down


International competitiveness

International competitiveness

  • World Economic Forum ranking

  • Japan was No. 1 in 1990

  • 14th in 1997

  • 15th in 2001

  • 10th in 2012

  • 9th in 2013


Political earthquake of 1993 95

Political earthquake of 1993-95

  • Economic stagnation since late 1980s

  • Major corruption scandals of LDP leaders

    • 2.5 billion yen contribution from a company

    • 1 billion yen income tax evasion

    • media revelation of systematic corruption

  • Businesses’ demand for political reform

    • high cost of doing business

    • political bribes and contributions


Industrial contributions

Industrial contributions


Party realignment 90s

Party Realignment (‘90s)


Prime ministers 1993 2001

Prime Ministers 1993-2001

  • non-LDP Prime Ministers 1993 - 1996

  • LDP coalition cabinets since 1996


New electoral rules 1996

New Electoral Rules (1996)

  • 480 members in House of Representatives

    • 300 elected from single-member districts

    • 180 elected from 11 proportional representation districts

  • 252 members in House of Councillors

    • 100 elected from proportional representation district

    • 152 elected from 47 prefecture constituencies


More shocks in 1990s

More shocks in 1990s

  • Large and rising government deficit and debt (~150% of GDP)

  • Aging population

  • Banking crises and non-performing loans

  • Asian financial crisis (1997-8)

  • “Hollowing out” of industry

  • natural disasters and terrorist attacks


Economic transformation

Economic transformation

  • capital market and currency had become deeply integrated into world markets

    • investment abroad

  • formal trade barriers and limits on foreign direct investment largely eliminated

  • Japanese-owned firms became multinational

    • overseas production, financing, R&D, and technological alliance


Appreciation of yen

Appreciation of yen


Changes in economic policies

Changes in economic policies

  • New reliance on

    • consumption taxes

    • borrowing

    • debt service

  • public debt more than twice its GDP

  • move away from monetary restraint

  • zero interest rate


Zero interest rate

Zero interest rate


Changes in economic policies1

Changes in economic policies

  • privatization of nationalized industries

  • official effort to support declining industries

  • protect the inefficient

  • promote the competitive


Inconsistent policies

Inconsistent policies

  • Lack of cohesiveness and singularity in economic policy

    • internal contradictions

  • no longer a cohesive strategy directed at structural improvement of economy

  • eclectic mixture of ad hoc efforts to deal with economic problems


Still an outlier

Still an outlier

  • Comparison with other industrialized democracies

  • markets for imports remained skewed against high value-added manufacturing goods

  • imports from overseas subsidiaries of Japanese-owned multinational corporations


Still an outlier1

Still an outlier

  • Comparison with other industrialized democracies

  • limited amount of foreign direct investment in Japan

  • FDI per capita in Japan is less than 10% of that in Germany, less than 5% of that in UK


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