Departments
Intermediate Japanese - Free Online Course
BABURU KEIZAI
バブル経済
"Bubble Economy"
Japan’s so-called “Bubble Economy” was a speculative boom-and-bust that swelled during the late 1980s and crashed in the early 1990s. The Japanese economy was the envy of the world in 1989; but the lingering effects of the eventual burst kept the country in recession throughout most the 1990s.
The Yen Crisis and the Bubble
The origins of the Bubble Economy can be found in the yen crisis of the mid-1980s. In 1985 and 1986, a sudden increase in the value of the yen hammered the Japanese export machine. The Ministry of Finance responded by lowering interest rates and inflating the stock market. Companies were able to acquire massive lines of equity-secured credit at near zero interest. And the rise in stock prices pumped even more money into Japan’s major corporations.
The Bubble Economy’s speculative run-up transformed the Japanese economy into an unstoppable juggernaut—for a time. Between 1986 and 1989, the value of the Nikkei Stock Index more than tripled. Land prices climbed with the stock market; in 1989, the value of the land in the Tokyo metropolitan area alone was greater than the value of all the land in many Western countries.
Expansion and Collapse
Japans’ industrial sector expanded rapidly during the Bubble Economy years. Japanese companies made speculative investments in capital equipment and overseas production facilities. Japanese banks went on an international real estate shopping spree. In 1989 Mitsubishi Estate Company acquired controlling interest in Manhattan’s Rockefeller Center. A number of similar high-profile purchases by Japanese investment groups made headlines around the same time.
Ironically, the bubble burst when the Ministry of Finance took preemptive action to cool the speculation. In the fall of 1989 the Japanese government began tightening credit. The interest rate charged on loans more than doubled in less than a year. The stock market reacted almost immediately. The Nikkei peaked at 40,000 in December 1989, but it had fallen to 20,000 by October of 1990.
The Aftermath
The drop in stock prices and the rise in interest rates caused a wave of bankruptcies and defaulted loans. Land prices fell precipitously. It took a while for the chaos in real estate and investment markets to affect the wider economy, though. In 1991, Japan’s GNP increased by a healthy 4%.
The slowdown hit the industrial sectors in 1992, and Japan entered a long period of economic doldrums. Many analysts have compared Japan’s 1990s economy to the economy of the 1970s, which was battered by two oil crises. At the time of this writing (early 2006), however, Japan’s economy is on the mend.
