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The
economic miracle ended abruptly at the very start of the 1990s.
In the late 1980s, abnormalities within the Japanese economic system
had fuelled a massive wave of speculation by Japanese companies,
banks and securities companies. Briefly, a combination of incredibly
high land values and incredibly low interest rates led to a position
in which credit was both easily available and extremely cheap.
This
led to massive borrowing, the proceeds of which were invested mostly
in domestic and foreign stocks and securities. Recognising that
this bubble was unsustainable (resting, as it did, on unrealisable
land values - the loans were ultimately secured on land holdings),
the Finance Ministry sharply raised interest rates. This popped
the bubble in spectacular fashion, leading to a massive crash in
the stock market. It also led to a debt crisis; a large proportion
of the huge debts that had been run up turned bad, which in turn
led to a crisis in the banking sector, with many banks having to
be bailed out by the government. Eventually, many become unsustainable,
and a wave of consolidation took place (there are now only four
national banks in Japan). Critically for the long-term economic
situation, it meant many Japanese firms were lumbered with massive
debts, affecting their ability for capital investment. It also meant
credit became very difficult to obtain, due to the beleaguered situation
of the banks; even now the official interest rate is at 0% and have
been for several years, and despite this credit is still difficult
to obtain. Overall, this has led to the phenomenon known as the
"lost decade"; economic expansion came to a total halt
in Japan during the 1990s. The impact on everyday life has been
rather muted, however. Unemployment runs reasonably high, but not
at crisis levels (the official figure is a little under 5%, but
this is a considerable underestimate - the real level is probably
around twice that). This has combined with the traditional Japanese
emphasis on frugality and saving (saving money is a cultural habit
in Japan) to produce a quite limited impact on the average Japanese
family, which continues much as it did in the period of the miracle.
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