Japanese Asset Bubble 1990
Japan’s late-1980s land and equity bubble burst in 1990–92 and became a multi-decade balance-sheet recession — the modern warning about zombification, ZIRP, and delayed write-downs.
Definition
Financial liberalization, a strong yen after Plaza, and easy policy inflated land and Nikkei. The 1989–90 tightening and land-tax politics pricked it. Banks hid NPLs; corporates delevered for years. Koo’s ‘balance-sheet recession’ is the household name for the demand side.
Why it matters
It showed that a rich country can lose a decade without a classic EM sudden stop. The scar is in credit demand, not just supply.
Case
Nikkei peak Dec 1989, land prices lagging down through the 1990s, and a zero-rate / QE policy experiment that the rest of the world later copied.
How to read it
Watch land as collateral, the speed of NPL recognition, and whether the private sector wants to borrow at any rate. If they do not, rate cuts are pushing on a string.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- The Holy Grail of Macroeconomics: Lessons from Japan's Great RecessionKoo · 2008 · WileyBalance-sheet recession narrative.