Japan's Great Stagnation: Financial and Monetary Policy Lessons for Advanced Economies (CESifo Seminar Series)

Experts on the Japanese economy examine Japan's prolonged period of economic underperformance, analyzing the ways in which the financial system, monetary policy, and international financial factors contributed to its onset and duration.After experiencing spectacular economic growth and industrial development for much of the postwar era, Japan plunged abruptly into recession in the early 1990s and since then has suffered a prolonged period of economic stagnation, from which it is only now emerging. Japan's malaise, marked by recession or weak economic activity, commodity and asset price deflation, banking failures, increased bankruptcies, and rising unemployment, has been the most sustained economic downturn seen in the industrial world since the 1930s. In Japan's Great Stagnation, experts on the Japanese economy consider key questions about the causes and effects of Japan's prolonged period of economic underperformance and what other advanced economies might learn from Japan's experience. They focus on aspects of the financial and banking system that have contributed to economic stagnation, the role of monetary policy, and the importance of international financial factors—in particular, the exchange rate and the balance of payments.Among the topics discussed are bank fragility and the inaccuracy of measuring it by the'Japan premium,'the consequences of weak banking regulation, the controversial policy of'quantitative easing,'and the effectiveness of currency devaluation for fighting deflation. Taken together, the contributions demonstrate the importance of a sound financial sector in fostering robust growth and healthy economies—and the enormous economic costs of a dysfunctional financial system.ContributorsYoichi Arai, Robert Dekle, Zekeriya Eser, Eiji Fujii, Kimie Harada, Takeo Hoshi, Michael M. Hutchison, Takatoshi Ito, Ken Kletzer, Nikolas Müller-Plantenberg, Kunio Okina, Joe Peek, Eric S. Rosengren, Shigenori Shiratsuka, Mark M. Spiegel, Frank Westermann, Nobuyoshi Yamori Experts on the Japanese economy examine Japan's prolonged period of economic underperformance, analyzing the ways in which the financial system, monetary policy, and international financial factors contributed to its onset and duration. After experiencing spectacular economic growth and industrial development for much of the postwar era, Japan plunged abruptly into recession in the early 1990s and since then has suffered a prolonged period of economic stagnation, from which it is only now emerging. Japan's malaise, marked by recession or weak economic activity, commodity and asset price deflation, banking failures, increased bankruptcies, and rising unemployment, has been the most sustained economic downturn seen in the industrial world since the 1930s. In Japan's Great Stagnation, experts on the Japanese economy consider key questions about the causes and effects of Japan's prolonged period of economic underperformance and what other advanced economies might learn from Japan's experience. They focus on aspects of the financial and banking system that have contributed to economic stagnation, the role of monetary policy, and the importance of international financial factorsin particular, the exchange rate and the balance of payments. Among the topics discussed are bank fragility and the inaccuracy of measuring it by the "Japan premium," the consequences of weak banking regulation, the controversial policy of "quantitative easing," and the effectiveness of currency devaluation for fighting deflation. Taken together, the contributions demonstrate the importance of a sound financial sector in fostering robust growth and healthy economiesand the enormous economic costs of a dysfunctional financial system. Contributors Yoichi Arai, Robert Dekle, Zekeriya Eser, Eiji Fujii, Kimie Harada, Takeo Hoshi, Michael M. Hutchison, Takatoshi Ito, Ken Kletzer, Nikolas Mller-Plantenberg, Kunio Okina, Joe Peek, Eric S. Rosengren, Shigenori Shiratsuka, Mark M. Spiegel, Frank Westermann, Nobuyoshi Yamori The Great Japanese Stagnation: Lessons For Industrial Countries / Michael M. Hutchinson, Takatoshi Ito, Frank Westermann -- Bank Fragility In Japan / Takatoshi Ito, Kimie Harada -- Deposit Insurance, Regulatory Forbearance, And Economic Growth: Implications For The Japanese Banking Crisis / Robert Dekle, Ken Kletzer -- Determinants Of Voluntary Bank Disclosure: Evidence From Japanese Shinkin Banks / Mark M. Spiegel, Nobuyoshi Yamori -- Secondary Bank Lending In Japan / Zekeriya Eser, Joe Peer, Eric S. Rosengren -- Monetary Policy In The Great Stagnation / Yoichi Arai, Takeo Hoshi -- The Policy Duration Effect And Zero Interest Rates: An Application Of Wavelet Analysis / Kunio Okina, Shigenori Shiratsuka -- Exchange Rate Pass-through In Deflationary Japan: How Effective Is The Yen's Depreciation For Fighting Deflation? / Eiji Fujii -- Japan's Imbalance Of Payments / Nikolas Müller-plantenberg. Edited By Michael M. Hutchison And Frank Westermann. Includes Bibliographical References And Index.