Big Data

The Realities And Relevance Of Japan's Great Recession: Neither Ran Nor Rashomon

Date Added: Jun 2010
Format: PDF

Japan's Great Recession was the result of a series of macroeconomic and financial policy mistakes. Thus, it was largely avoidable once the initial shock from the bubble bursting had passed. The aberration in Japan's recession was not the behavior of growth, which is best seen as a series of recoveries aborted by policy errors. Rather, the surprise was the persistent steadiness of limited deflation, even after recovery took place. This is a more fundamental challenge to the basic macroeconomic understanding than is commonly recognized. The UK and US economies are at low risk of having recurrent recessions through macroeconomic policy mistakes - but deflation itself cannot be ruled out.