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Hardcover | $40.00 Short | £27.95 | ISBN: 9780262083478 | 290 pp. | 6 x 9 in | 95 illus.| June 2006

Essential Info

Japan's Great Stagnation

Financial and Monetary Policy Lessons for Advanced Economies


After experiencing spectacular economic growth and industrial development for much of the postwar era, Japan plunged abruptly into recession in the early 1990s and since then has suffered a prolonged period of economic stagnation, from which it is only now emerging. Japan's malaise, marked by recession or weak economic activity, commodity and asset price deflation, banking failures, increased bankruptcies, and rising unemployment, has been the most sustained economic downturn seen in the industrial world since the 1930s. In Japan's Great Stagnation, experts on the Japanese economy consider key questions about the causes and effects of Japan's prolonged period of economic underperformance and what other advanced economies might learn from Japan's experience. They focus on aspects of the financial and banking system that have contributed to economic stagnation, the role of monetary policy, and the importance of international financial factors—in particular, the exchange rate and the balance of payments.

Among the topics discussed are bank fragility and the inaccuracy of measuring it by the "Japan premium," the consequences of weak banking regulation, the controversial policy of "quantitative easing," and the effectiveness of currency devaluation for fighting deflation. Taken together, the contributions demonstrate the importance of a sound financial sector in fostering robust growth and healthy economies—and the enormous economic costs of a dysfunctional financial system.

Yoichi Arai, Robert Dekle, Zekeriya Eser, Eiji Fujii, Kimie Harada, Takeo Hoshi, Michael M. Hutchison, Takatoshi Ito, Ken Kletzer, Nikolas Müller-Plantenberg, Kunio Okina, Joe Peek, Eric S. Rosengren, Shigenori Shiratsuka, Mark M. Spiegel, Frank Westermann, Nobuyoshi Yamori

About the Editors

Michael M. Hutchison is Professor of Economics at the University of California, Santa Cruz. He is coauthor of The Political Economy of Japanese Monetary Policy (MIT Press, 1997) and Financial Policy and Central Banking in Japan (MIT Press, 2000).

Frank Westermann is Chair for International Economic Policy in the Department of Economics and Business Administration, University of Osnabrueck, Germany.


"For years now, those of us teaching the Depression of the 1930s have answered negatively when asked whether it could happen again. Central bankers understand how to head off a deflation. Regulators know how to prevent the banking system from crashing. Policy makers, we reassure our students, have learned the lessons of history. Now Japan's great stagnation is forcing us to rethink this textbook wisdom. Hutchison and Westermann's book will help us figure out how to answer the question when it is posed to future generations of students."
Barry Eichengreen, University of California, Berkeley