Award Information

Abe Fellowship 1998
Institutional Affiliation (at time of award):
Professor, Economics, University of Pennsylvania
Japanese Recession of the 1990's and its Lessons for Advanced Industrial Countries

I plan to inquire into the nature and causes of the current economic malaise in Japan. In my preliminary study of the subject, I have concluded that, while often mentioned factors such as the aftermath of the land and equity price bubbles of 1985-90, the weakness of the asset position of banks and others have all contributed to the prolonged recession, the most critical problem is that, as the potential growth rate of the Japanese economy has declined from more than 10% in 1955-70 to between 1.5 to 2% in the 1990's, the saving rate of Japanese households has remained high, and investment by businesses in plant and equipment has also remained very high, leading to over investment in this type of capital. This in tum appears to have depressed the market value of these assets, reducing the net worth of households, and inducing further savings by them. I wish to check the validity and importance of these hypotheses, investigate causes of this development, and consider their international repercussions and the potential policy choices for Japanese government to alleviate the situation as well as ways for the U.S. government to support the Japanese effort to deal with the problems.