History of Japan Episode 294 - What Goes Up, Part 5
Jun 21, 2019
Explore the tumultuous economic landscape of Japan in the early 1990s as the asset bubble collapses, revealing shocking damage. Discover how over-leveraged real estate investments led to a banking crisis reminiscent of the U.S. housing collapse. Learn about the government's inconsistent responses and the creation of 'zombie firms' amid financial turmoil. Delve into Japan’s cautious post-war economic strategy and the lasting echoes of the lost decades, affecting today’s workforce and employment practices.
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Hidden Depths of Bubble Collapse
- The asset bubble's burst was worse due to its deep integration into corporate and bank assets.
- Banks had risky loans assuming continuous real estate value growth, which collapsed when prices dipped.
Banking Crisis Through NPLs
- Japanese banks held 6-8% of assets in non-performing loans—a large increase from 2% during 1927 crisis.
- This spike signaled a severe financial predicament threatening bank solvency and economic stability.
Denial Delayed Crisis Response
- Leadership denial prolonged the crisis, assuming market correction without systemic failure.
- The reluctance to admit major financial problems delayed critical stabilization efforts.
