The Long Downturn in the Japanese Economy

Abstract

The Japanese economy has been in continuous downturn since 1973, initiated by the inflationary crisis of 1973–75. Broadly, the process of this downturn lasting to the present time can also be seen as a continuous crisis, enforcing a great transformation of society, with hardships for capitalist firms and working people. Through the long downturn the Japanese economy has performed a double shift downward: from high economic growth to lowered growth, and further to extremely low growth in the 1990s. Each time the result has been a growth rate less than half the one before. The origins of economic crisis as well as the determinants of its special features are usually found in the preceding phase of prosperity. In the 22 years since 1951, the Japanese economy enjoyed continuous prosperity with an average annual growth rate of 9.2 per cent, and increased its real GDP sevenfold. Such high economic growth now seems an old fable of miracles, though it was a relatively recent occurrence. Let us reconsider the major factors behind continuous high economic growth in the Japanese economy, and why and how they came to an end at the last phase of that period.