In asset bubble. In the late 1980s Japans

In Japan in the 1990s there was a period that was referred to as The Lost Decade, which was a period of economic stagnation. This happened to be followed by the asset price bubble collapse, which collapsed in 1991-1992.
The Japanese asset price bubble, which was from 1986 to 1991, was an economic bubble where real estate and stock prices were greatly inflated. This bubble was more like a rapid stimulation in asset prices, uncontrolled money supply, and the expansion of credit. The bubble was caused by excessive growth on banks by the Japanese central banks. In late 1991, the collapse of the asset price bubble resulted in a large buildup of non-performing asset loans. Paul Krugman said, “Japans banks lent more, with less regard for quality of the borrower, than anyone else’s. In doing so they helped inflate the bubble economy to grotesque proportions.” The asset price bubble was known as The Lost Decade. Recently, it is mentioned that 2001-2010 is now included in this crisis, which is called the Lost Score of the Lost 20 Years. The entire Japanese country was affected from 1995-2007 by this financial crisis. The GDP of $5.33 trillion dollars dropped to $4.36 trillion dollars, but not only that but the real wages also fell about 5%. The banking crisis in Japan was the direct result of the asset price bubble. The deregulation of the Japanese financial system ensure from aggressive and competitive changes. Loan portfolios were concentrated in property-related businesses but majority were collateralized by land. The economic slowdown and price deflation of the 1990s were led to increased levels of non-performing loans. In 2012 interest rates were .1% and have remained below 1% since 1994. The Bank of Japan, central bank of Japan, made several mistakes during this time which may in fact caused the prolonged a lot of the negative effects of the bursting of the asset bubble. In the late 1980s Japans central bank put the stop on the money supply, which contributed to the bursting of the asset bubble. As the assets, equity, continued to fall the Bank of Japan continued to increase the interest rates because they still believe that the real estate values were appreciating.
Factors that led to this financial crisis were the Post-war system and Bad debts loans. Some of the main causes of the Japanese financial crisis were deregulation of post-war system, real estate asset bubble and the stock market, and decisive policy changes.
The 2008 U.S. Financial Crisis was similar to the Japanese 1990s Financial Crisis and was also called The Lost Decade by some as well. The 2008 U.S. Financial Crisis also dealt with declines in real estate values and the stock market crash. However, a major contributor to the Japanese financial crisis was the fact they had negative demographics, whereas the United States had a positive one where they had younger workers in the workplace. The Federal Reserve in the United States acted much quicker than the Central bank in Japan, Bank of Japan.
Some key take a ways from this crisis is that you should act as quickly as possible when you notice a crisis is happening, don’t spend it is not the answer to the problems, and don’t continue to rack up the debt. Japanese 1990s financial crisis is similar to the 2008 U.S. Financial crisis, but it does have some differences.


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