ABSTRACT
This chapter discusses the characteristics and the structure of Japan's bubble economy. It looks at the financial aspects of Japan's bubble economy and the endogenous factors that led to it. The chapter examines the characteristics of Japan's external investment during the bubble period. Of particular concern will be investments in United States real estate in the 1980s and the 1990s and the relations between these characteristics and the yen-dollar rate. The chapter also examines the immediate events that led up to the Japanese bubble, beginning with domestic causes and then turning to international causes. Japanese investors were increasingly investing in foreign real estate for speculative purposes instead of using overseas investment, including direct investment, for more restricted purposes. The Foreign Exchange Law and the Foreign Investment Law regulated foreign exchange transactions in Japan until 1980; in principle, overseas transactions by private agents were prohibited.
