ABSTRACT
The expression lost decades is nowadays used to refer to the economic and market decline and broad political and social conditions in Japan in the last decade of the twentieth and the first decade of the twenty-first century. The two lost decades in Japan grew out of years of rigid decision-making processes and the avoidance of responsibility. This chapter investigates the macroeconomic policies that were taken at the time and elucidates the opportunities that were gained and lost during the two lost decades. The dominant understanding in Japan in the early 1990s was that the collapse of the real estate bubble had created the nonperforming loans (NPLs) and that they would not really have any damaging effect on the economy. The main agents behind counter-cyclical economic policies were the Ministry of Finance (MOF), the Ministry of International Trade and Industry (MITI) later renamed the Ministry of Economy, Trade and Industry, (METI) and the Economic Planning Agency (EPA).
