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Monetary and international factors behind Japan's lost decade

Authors
Journal
Journal of the Japanese and International Economies
0889-1583
Publisher
Elsevier
Publication Date
Volume
23
Issue
2
Identifiers
DOI: 10.1016/j.jjie.2009.01.004
Keywords
  • Japanese Economy
  • Lost Decade
  • Deflation
  • Exchange Rate
Disciplines
  • Economics

Abstract

Most studies on Japan's “lost decade” have been broadly focused on its real and domestic aspects, such as total factory productivity (TPF), growth decline, non-performing loans, and governance. This paper shows that monetary and international factors played as an equally important role as those non-monetary and domestic factors in generating the prolonged Japan's stagnation. The Plaza Accord in 1985 managed to alter the major exchange rates mainly by verbal promises combined with coordinated monetary policies, and triggered the trend for the stronger real exchange rate of the yen. The subsequent monetary exchange rate policy kept the real exchanged greatly overvalued. Japanese industries endured a heavy burden during this period. J. Japanese Int. Economies 23 (2) (2009) 200–219.

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