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121-721: From 1991 to 2003, the Japanese economy , as measured by GDP, grew only 1.14% annually, while the average real growth rate between 2000 and 2010 was about 1%, both well below other industrialized nations . Debt levels continued to rise in response to the financial crisis in the Great Recession in 2008, the Tōhoku earthquake and tsunami and Fukushima nuclear disaster in 2011, and the COVID-19 pandemic and subsequent recession between January 2020 and October 2021. Broadly impacting

242-589: A free trade agreement between Japan and the European Union was cleared to commence in February 2019. It creates the world's largest free trade zone valued at 1/3rd of global gross domestic product. This reduces tariffs on Japanese cars by 10%, duties by 30% on cheese and 10% on wines and opens service markets. In early January 2020, Japanese economy began to suffer from the COVID-19 pandemic . In early April, Japanese Prime Minister Shinzo Abe announced

363-571: A liquidity trap (a situation in which monetary policy is unable to lower nominal interest rates because it is already close to zero). He explained how truly massive the asset bubble was in Japan by 1990, with a tripling of land and stock market prices during the prosperous 1980s. Japan's high personal savings rates, driven in part by the demographics of an aging population, enabled Japanese firms to rely heavily on traditional bank loans from supporting banking networks, as opposed to issuing stock or bonds via

484-535: A state of emergency . Less than a quarter of Japanese people expected living conditions to improve in the coming decades. In October 2020 during the pandemic, Japan and the United Kingdom formally signed the first free-trade agreement post- Brexit , which will boost trade by approximately £15.2 billion. It enables tariff-free trade on 99% of exports to Japan. On 15 February 2021, the Nikkei average breached

605-534: A 28.3% fall 21 years earlier, but some traders were saying it was worse. "At least then it was a short, sharp, shock on one day. This has been relentless all week." Other media also referred to the events as the "Crash of 2008". From October 6–10, 2008, the Dow Jones Industrial Average (DJIA) closed lower in all five sessions. Volume levels were record-breaking. The DJIA fell over 1,874 points, or 18%, in its worst weekly decline ever on both

726-465: A bear market. Likewise, the bursting of the Japanese asset price bubble occurred over several years without any notable crashes. Stock market crashes are not common. Crashes are generally unexpected. As Niall Ferguson stated, "Before the crash, our world seems almost stationary, deceptively so, balanced, at a set point. So that when the crash finally hits – as inevitably it will – everyone seems surprised. And our brains keep telling us it’s not time for

847-643: A civil war in China , mainly in Kyushu . This trade dwindled by the 1740s under renewed Chinese competition but resumed after Japan’s mid-19th century opening. Economic development during the Edo period included urbanisation , increased commodity shipping, and expanded domestic and foreign commerce. The construction trades, banking facilities, and merchant associations flourished. Daimyō -led authorities ( han ) oversaw rising agricultural production and rural handicrafts. By

968-675: A consequence Japan ran massive budget deficits (added trillions in Yen to Japanese financial system) to finance large public works programs. By 1998, Japan's public works projects still could not stimulate demand enough to end the economy's stagnation. In desperation, the Japanese government undertook "structural reform" policies intended to wring speculative excesses from the stock and real estate markets. Unfortunately, these policies led Japan into deflation on numerous occasions between 1999 and 2004. The Bank of Japan used quantitative easing to expand

1089-631: A crash." Tulip Mania (1634–1637), in which some single tulip bulbs allegedly sold for more than 10 times the annual income of a skilled artisan , is often considered to be the first recorded economic bubble . In 1907 and in 1908, stock prices fell by nearly 50% due to a variety of factors, led by the manipulation of copper stocks by the Knickerbocker Trust Company . Shares of United Copper rose gradually up to October, and thereafter crashed, leading to panic. Several investment trusts and banks that had invested their money in

1210-886: A global crisis. This resulted in several bank failures in Europe and sharp reductions in the value of stocks and commodities worldwide. The failure of banks in Iceland resulted in a devaluation of the Icelandic króna and threatened the government with bankruptcy. Iceland obtained an emergency loan from the International Monetary Fund in November. In the United States, 15 banks failed in 2008, while several others were rescued through government intervention or acquisitions by other banks. On October 11, 2008,

1331-463: A key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this decline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type Great Depression , in which U.S. GDP fell by 46%. He argued that monetary policy

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1452-418: A land reform program to prepare the country for further development. To promote industrialization , the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth. The greatest role of government was to help provide good economic conditions for business. In short, government was to be the guide and business

1573-706: A nominal rate of 0% effectively meant a positive real rate due to the increasing value of cash. This phenomenon is known as the "Zero Interest Rate Constraint". In 2013, BoJ implemented the Quantitative and Qualitative Monetary Easing Policy, and in 2016, it introduced a negative bank rate of −0.1%. This policy achieved mild inflation of around 0–1.0% in the late 2010s. The global inflation surge from 2021 to 2023 finally helped Japan reach an inflation rate of above 2%. However, while other major economies focus on suppressing inflation by raising interest rates, Japan aims to firmly establish inflation by maintaining low rates. As

1694-527: A pathological condition where the bid price for a stock exceeded the ask price . These "locked" conditions severely curtailed trading. On October 19, trading in Microsoft shares on the NASDAQ lasted a total of 54 minutes. The crash was the greatest single-day loss that Wall Street had ever suffered in continuous trading up to that point. Between the start of trading on October 14 to the close on October 19,

1815-467: A percentage of GDP, at ~240% Japan had the highest level of debt of any nation on earth as of 2013. While Japan's is a special case where the majority of public debt is held in the domestic market and by the Bank of Japan, the sheer size of the debt demands large service payments and is a worrying sign of the country's financial health. More than 25 years after the initial market crash, Japan was still feeling

1936-473: A period of high growth, often referred to as the ' Japanese Economic Miracle '. Key factors in this growth included government-industry cooperation, a strong work ethic, advanced technology, and a focus on export-oriented manufacturing . Japan’s economy diversified from textiles to steel, shipbuilding, and eventually electronics and automobiles, with companies such as Toyota , Sony , Hitachi and Honda becoming household names worldwide. In 1968, Japan became

2057-525: A points and percentage basis. The S&P 500 fell more than 20%. The week also set 3 top ten NYSE Group Volume Records with October 8 at #5, October 9 at #10, and October 10 at #1. Having been suspended for three successive trading days (October 9, 10, and 13), the Icelandic stock market reopened on 14 October, with the main index, the OMX Iceland 15 , closing at 678.4, which was about 77% lower than

2178-545: A repeat of the Great Depression , the market rallied immediately after the crash, posting a record one-day gain of 102.27 the very next day and 186.64 points on Thursday, October 22. It took only two years for the Dow to recover completely; by September 1989, the market had regained all of the value it had lost in the 1987 crash. The DJIA gained 0.6% during calendar year 1987. No definitive conclusions have been reached on

2299-510: A result, bank credit growth stagnated. The financial institutions were bailed out through capital infusions from the Government of Japan , loans and cheap credit from the central bank, and the ability to postpone the recognition of losses, ultimately turning them into zombie banks . Yalman Onaran of Bloomberg News writing in Salon stated that the zombie banks were one of the reasons for

2420-565: A side effect, the Japanese yen has become extremely weak, hitting a 37.5-year low of 161 yen/USD in July 2024. Furthermore, the real effective exchange rate in May 2024, when the 2020 average is set at 100, is 68.65, the lowest level since the start of the Bank of Japan statistics in January 1970, due to a combination of low inflation in Japan and a relatively low trade share. This devaluation of

2541-450: A side effect, the Japanese yen has become extremely weak, hitting a 37.5-year low of 161 yen/USD in July 2024. The real effective exchange rate was at 68.36 in June 2024, the lowest level since statistics began in 1970, with the 2020 average set at 100. This devaluation of the currency caused Japan to lose its status as the world's third largest economy to Germany in nominal terms, which

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2662-717: A significant decline in the stock market value of a wide range of stocks. Stock prices for corporations competing against the affected corporations may rise despite the crash. There is no numerically specific definition of a stock market crash but the term commonly applies to declines of over 10% in a stock market index over a period of several days. Crashes are often distinguished from bear markets (periods of declining stock market prices that are measured in months or years) as crashes include panic selling and abrupt, dramatic price declines. Crashes are often associated with bear markets; however, they do not necessarily occur simultaneously. Black Monday (1987) , for example, did not lead to

2783-461: A strict random walk , stock price variations executed a Lévy flight . A Lévy flight is a random walk that is occasionally disrupted by large movements. In 1995, Rosario Mantegna and Gene Stanley analyzed a million records of the S&;P 500 Index , calculating the returns over a five-year period. Researchers continue to study this theory, particularly using computer simulation of crowd behavior, and

2904-416: A wave of consolidation took place, resulting in four national banks in Japan. Many Japanese firms were burdened with heavy debts, and it became very difficult to obtain credit. Many borrowers turned to sarakin (loan sharks) for loans. As of 2012, the official interest rate was 0.1%; the interest rate has remained below 1% since 1994. Despite mild economic recovery in the 2000s, conspicuous consumption of

3025-668: A year by the 2020 Summer Olympics in Tokyo. Some of the most popular visited places include the Shinjuku , Ginza , Shibuya and Asakusa areas in Tokyo , and the cities of Osaka , Kobe and Kyoto , as well as Himeji Castle . Hokkaido is also a popular winter destination for visitors with several ski resorts and luxury hotels being built there. Japan's economy is less dependent on international tourism than those of other G7 countries and OECD countries in general; from 1995 to 2014, it

3146-546: Is a sudden dramatic decline of stock prices across a major cross-section of a stock market , resulting in a significant loss of paper wealth . Crashes are driven by panic selling and underlying economic factors. They often follow speculation and economic bubbles . A stock market crash is a social phenomenon where external economic events combine with crowd psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. Generally speaking, crashes usually occur under

3267-479: Is also highly subsidized and protected, with government regulations that favor small-scale cultivation instead of large-scale agriculture as practiced in North America. There has been a growing concern about farming as the current farmers are aging with a difficult time finding successors. Rice accounts for almost all of Japan's cereal production. Japan is the second-largest agricultural product importer in

3388-404: Is easier for panic to take hold and affect the market. This work is a mathematical demonstration of a significant advance warning sign of impending market crashes. One mitigation strategy has been the introduction of trading curbs , also known as "circuit breakers", which are a trading halt in the cash market and the corresponding trading halt in the derivative markets triggered by the halt in

3509-415: Is held by the Bank of Japan, and most of the remainder is also held domestically. The Japanese economy faces considerable challenges posed by an ageing and declining population , which peaked at 128.5 million people in 2010 and has fallen to 122.6 million people in 2024. In 2022, the country's working age population consisted of approximately 59.4% of the total population, which was the lowest rate among all

3630-438: Is leading to depletion in fish stocks such as tuna . Japan has also sparked controversy by supporting quasi-commercial whaling . Japanese manufacturing and industry is very diversified, with a variety of advanced industries that are highly successful. Industry accounts for 30.1% (2017) of the nation's GDP. The country's manufacturing output is the third highest in the world. Industry is concentrated in several regions, with

3751-412: Is nearly 250% of Japan's GDP. Economist Kohei Iwahara said such an exceptional debt to GDP level is only possible because Japanese hold most of the debt: "“Japanese households hold most of their savings in bank accounts (48%) and these sums are used by commercial banks to buy Japanese government bonds. Thus, 85.7% of these bonds are held by Japanese investors.” The Bank of Japan 's main policy aim since

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3872-402: Is suspended for 15 minutes. If the price then goes up or down by more than 5%, transactions are again suspended for 15 minutes. The 5% threshold may apply once more before transactions are halted for the rest of the day. When such a suspension occurs, transactions on options based on the underlying security are also suspended. Further, when stocks representing more than 35% of the capitalization of

3993-556: Is the 5th largest market for the European Union's agricultural exports. Over 90% of mandarin oranges in Japan are grown in Japan. Apples are also grown due to restrictions on apple imports. Japan ranked fourth in the world in 1996 in tonnage of fish caught . Japan captured 4,074,580 metric tons of fish in 2005, down from 4,987,703 tons in 2000, 9,558,615 tons in 1990, 9,864,422 tons in 1980, 8,520,397 tons in 1970, 5,583,796 tons in 1960 and 2,881,855 tons in 1950. In 2003,

4114-483: The San Juan Bautista , and commissioned around 350 Red Seal Ships for intra-Asian commerce. Japanese adventurers, such as Yamada Nagamasa , were active throughout Asia. To eradicate Christian influence , Japan entered a period of isolation called sakoku in the 1630s, which led to economic stability and mild progress. In the 1650s, Japanese export porcelain production increased significantly due to

4235-725: The Bank of Japan set out to encourage economic growth through a novel policy of quantitative easing, aiming to end deflation and eventually achieve 2% inflation . The increased international economic tension brought about by events such as the Russian invasion of Ukraine in 2022 finally helped the country achieve the inflation target, and the negative interest policy since 2016 was ended in March 2024. As of 2021, Japan has significantly higher levels of public debt than any other developed nations at approximately 260% of GDP. 45% of this debt

4356-554: The British pound and Canadian dollar , as world investors sought safe havens. Later that day, the deputy governor of the Bank of England , Charlie Bean , suggested that "This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history." By March 6, 2009, the DJIA had dropped 54% to 6,469 from its peak of 14,164 on October 9, 2007, over a span of 17 months, before beginning to recover. During

4477-527: The CAC 40 stock market index in France, daily price limits are implemented in cash and derivative markets. Securities traded on the markets are divided into three categories according to the number and volume of daily transactions. Price limits for each security vary by category. For instance, for the most liquid category, when the price movement of a security from the previous day's closing price exceeds 10%, trading

4598-599: The Forbes Global 2000 or 12.55% (as of 2013). In 2012, Japan was the fifth most visited country in Asia and the Pacific, with over 8.3 million tourists. In 2013, due to the weaker yen and easier visa requirements for southwest Asian countries, Japan received a record 11.25 million visitors, which was higher than the government's projected goal of 10 million visitors. The government hopes to attract 40 million visitors

4719-669: The Goldman Sachs Trading Corporation. Investors were infatuated with the returns available in the stock market, especially by the use of leverage through margin debt (i.e., borrowing money from your stockbroker to finance part of your purchase of stocks, using the bought securities as collateral). On August 24, 1921, the Dow Jones Industrial Average (DJIA) was at 63.9. By September 3, 1929, it had risen more than sixfold to 381.2. It did not regain this level for another 25 years. By

4840-855: The Kantō region surrounding Tokyo, (the Keihin industrial region ) as well as the Kansai region surrounding Osaka (the Hanshin industrial region ) and the Tōkai region surrounding Nagoya (the Chūkyō–Tōkai industrial region ) the main industrial centers. Other industrial centers include the southwestern part of Honshū and northern Shikoku around the Seto Inland Sea (the Setouchi industrial region); and

4961-483: The Meiji government . During the Meiji period (1868–1912), leaders inaugurated a new Western-based education system for all young people, sent thousands of students to Europe and the United States, and hired more than 3,000 Westerners to teach modern science, mathematics, technology, and foreign languages in Japan ( Oyatoi gaikokujin ). The government also built an extensive railway network, improved roads, and inaugurated

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5082-525: The Ministry of Health, Labour and Welfare showed that household income in 2010 had fallen to 1987 levels. According to Teikoku Databank, Japan's largest credit rating agency, the aggregate sales of all companies in Japan decreased by 3.9% in 2010 compared to 2000, or a decrease of 13,848.2 billion yen. The wider economy of Japan is still recovering from the impact of the 1991 crash and subsequent lost decades. It took 12 years for Japan's GDP to recover to

5203-614: The New York Stock Exchange rose from 65 million shares to 181 million shares. The crash on October 19, 1987, Black Monday , was the climactic culmination of a market decline that had begun five days before on October 14. The DJIA fell 3.81% on October 14, followed by another 4.60% drop on Friday, October 16. On Black Monday, the DJIA plummeted 508 points, losing 22.6% of its value in one day. The S&P 500 Index dropped 20.4%, falling from 282.7 to 225.06. The NASDAQ Composite lost only 11.3%, not because of restraint on

5324-513: The OECD , Japan was the first country in Asia to achieve developed country status. In 2018, Japan was the fourth-largest in the world both as an importer and as an exporter . The country also has the world's fourth-largest consumer market . Generally, Japan runs an annual trade surplus and has a considerable net international investment surplus. The country has the world's second-largest foreign-exchange reserves, worth $ 1.4 trillion. Japan has

5445-580: The Plaza Accord and the policy of Ministry of Finance to reduce the official discount rate are insufficient to explain the actions taken by the Bank of Japan. Trying to deflate speculation and keep inflation in check, the Bank of Japan sharply raised inter-bank lending rates in late 1989. This sharp policy caused the bursting of the bubble, and the Japanese stock market crashed . Equity and asset prices fell, leaving overly-leveraged Japanese banks and insurance companies with books full of bad debt. As

5566-505: The fifth-largest by purchasing power parity (PPP), below India and Russia. It constituted 4.2% of the world's economy on a nominal basis in 2022. According to the IMF , the country's per capita GDP (PPP) was at $ 54,184 (2024). Due to a volatile currency exchange rate , Japan 's nominal GDP as measured in dollars fluctuates sharply. Being a founding member of the G7 and an early member of

5687-488: The third-largest financial assets in the world , valued at $ 12 trillion, or 8.6% of the global GDP total as of 2020. Japan is the world's largest creditor nation. Japan has a highly efficient and strong social security system , which comprises roughly 23.5% of GDP . The Tokyo Stock Exchange is the world's fifth-largest stock exchange by market capitalisation . Japan has a highly service-dominated economy, which contributes approximately 70% of GDP, with most of

5808-529: The ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era, previously much celebrated by investors, now served to deepen their suffering. The following day, Black Tuesday, was a day of chaos. Forced to liquidate their stocks because of margin calls , overextended investors flooded

5929-496: The 1980s has not returned to the same pre-crash levels. Japanese firms such as Toyota , Sony , Panasonic , Sharp , and Toshiba , which had dominated their respective industries from the 1960s to the 1990s, had to fend off strong competition from rival firms based in other East Asian countries, particularly South Korea , and China, since the 2000s. In 1989, of the world's top 50 companies by market capitalization , 32 were Japanese; by 2018, only one such company ( Toyota ) remains in

6050-472: The 1990s. In 2022, Japan spent around 3.7% of GDP on research and development. As of 2022, 47 of the Fortune Global 500 companies are based in Japan. Long having been an agricultural country, one study estimates that Japan’s economy was among the top ten in the world by size during the second millennium before the industrial revolution started. Industrialisation in Japan began in the second half of

6171-537: The 19th century with the Meiji Restoration , initially focusing on the textile industry and later on heavy industries. The country rapidly built its colonial empire and the third most powerful navy in the world. After the defeat in the Second World War , Japan’s economy recovered and developed further rapidly, primarily propelled by its lucrative manufacturing exporting industries. It became

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6292-555: The 3,004.6 at the close on October 8. This reflected that the value of the three big banks, which had formed 73.2% of the value of the OMX Iceland 15, had been set to zero. On October 24, 2008, many of the world's stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices. In the U.S., the DJIA fell 3.6%, although not as much as other markets. The United States dollar and Japanese yen soared against other major currencies, particularly

6413-572: The 30-year struggle against deflation, improvements in corporate governance, and high corporate profits boosted the stock market. Consequently, both the Nikkei 225 and TOPIX indices surpassed the record highs they reached more than 30 years ago in 2024. The market capitalisation of the Tokyo Stock Exchange’s prime section exceeded a quadrillion yen for the first time in July 2024. Industries by GDP value-added 2012. Values are converted using

6534-464: The 30k benchmark, the highest since November 1991. It was due to strong corporate earnings, GDP data and optimism over the COVID-19 vaccination program in the country. At the end of March 2022, the Ministry of Finance announced that the national debt reached precisely 1.017 million billion yen. The total public debt of the country, which includes debts contracted by local governments, represents 1.210 million billion yen (9,200 billion dollars) which

6655-414: The DJIA lost 760 points, a decline of over 31%. In October 1987, all major world markets crashed or declined substantially. The FTSE 100 Index lost 10.8% on that Monday and a further 12.2% the following day. The least affected was Austria (a fall of 11.4%) while the most affected was Hong Kong with a drop of 45.8%. Out of 23 major industrial countries, 19 had a decline greater than 20%. Despite fears of

6776-420: The Japanese economy. Economists Fumio Hayashi and Edward Prescott argue that the anemic performance of the Japanese economy since the early 1990s is mainly due to the low growth rate of aggregate productivity. Their hypothesis stands in direct contrast to popular explanations that are based in terms of an extended credit crunch that emerged in the aftermath of a bursting asset "bubble." They are led to explore

6897-412: The Japanese yen, led to a rapid appreciation of the yen. The burst of the Japanese asset price bubble in the early 1990s has resulted in a long period of economic stagnation known as the “ Lost Decades ”, characterised by extremely low or negative growth and deflation. From 1995 to 2007, the country’s GDP fell from $ 5.33 trillion to $ 5.04 trillion in nominal terms. At the beginning of the 21st century,

7018-656: The Lost Decades started had been to end deflation and eventually achieve 2% inflation . The increased international economic tension brought about by events such as the Russian Invasion of Ukraine in 2022 finally helped the country achieve the much-anticipated inflation target of 2%, and the negative interest policy since 2016 was ended in March 2024. However, while other major economies focus on suppressing inflation by raising interest rates, Japan aims to firmly establish inflation by maintaining low rates. As

7139-574: The Nasdaq each dropped by approximately 9.5%. The major European stock market indexes all fell over 10%. On March 16, 2020, after it became clear that a recession was inevitable, the DJIA dropped 12.93%, or 2,997 points, the largest point drop since Black Monday (1987) , surpassing the drop in the prior week, the Nasdaq Composite dropped 12.32%, and the S&;P 500 Index dropped 11.98%. By

7260-627: The OECD countries. Projections show that the population will continue to fall, potentially to below 100 million by the middle of the 21st century. The economic history of Japan is one of the most studied. Major milestones in modern Japan's economic progress include: The beginning of the Edo period coincides with the last decades of the Nanban trade period , marked by intense interaction with European powers. Japan built its first Western-style warships, such as

7381-480: The S&P 500 Index dropped 7.60%. The Italian FTSE MIB fell 2,323.98 points, or 11.17%. On March 12, 2020, a day after US President Donald Trump announced a travel ban from Europe, stock prices again fell sharply. The DJIA declined 9.99% – the largest daily decline since Black Monday (1987) – despite the Federal Reserve announcing it would inject $ 1.5 trillion into money markets. The S&P 500 and

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7502-502: The US and European Union during the same period. Unlike previous recovery trends, domestic consumption has been the dominant factor of growth. Despite having interest rates down near zero for a long period of time, the quantitative easing strategy did not succeed in stopping price deflation. This led some economists, such as Paul Krugman, and some Japanese politicians, to advocate the generation of higher inflation expectations. In July 2006,

7623-531: The United Kingdom, in 2021 labor productivity of Japan was the lowest in the G7 and ranked 29th of 38 OECD members. In response to chronic deflation and low growth, Japan has attempted economic stimulus and thereby run a fiscal deficit since 1991. These economic stimuli have had at best nebulous effects on the Japanese economy and have contributed to the huge debt burden on the Japanese government. Expressed as

7744-491: The United States was in danger of becoming "enmeshed in a Japanese-style deflationary outcome within the next several years." However, this scenario did not happen. Economy of Japan The economy of Japan is a highly developed mixed economy , often referred to as an East Asian model . It is the fourth-largest economy in the world by nominal GDP behind the United States , China , and Germany , and

7865-520: The United States, South Korea, and Taiwan. Japan is the third biggest producer of automobiles in the world . Toyota is currently the world's largest car maker, and the Japanese car makers Nissan , Honda , Suzuki , and Mazda also count for some of the largest car makers in the world. By number, Japan is the world's largest exporter of cars as of 2021. Japan's mining production has been minimal, and Japan has very little mining deposits. However, massive deposits of rare earths have been found off

7986-514: The West after being pressured by the United States twice in 1853 and 1854. Since the mid-19th century, after the Meiji Restoration , the country was opened up to Western commerce and influence and went through a period of economic development that extended through to the First World War . Economic developments of the prewar period began with the " Rich State and Strong Army Policy " by

8107-534: The acceleration of the ageing population , gradually diminished the competitiveness of the economy and the potential growth rate of the country. The Bank of Japan (BoJ) and the Japanese government has focused on halting the deflation and eventually achieving the 2% inflation target since the early 2000s. However, as deflation persisted, the traditional monetary policy of setting low interest rates to stimulate investment and consumption, which typically causes inflation, became ineffective. This ineffectiveness arose because

8228-468: The announced reform was strong, and the Nikkei 225 rallied to 20,000 in May 2015 from a low of around 9,000 in 2008. The Bank of Japan has set a 2% target for consumer-price inflation, although initial successes has been hampered by a sales tax increase enacted to balance the government budget. However, the impact on wages and consumer sentiment was more muted. A Kyodo News poll in January 2014 found that 73% of Japanese respondents had not personally noticed

8349-499: The applicability of models to reproduce crash-like phenomena. In 2011, using statistical analysis tools of complex systems , research at the New England Complex Systems Institute found that the panics that lead to crashes come from a dramatic increase in imitation among investors, which always occurred during the year before each market crash. When investors closely follow each other's cues, it

8470-600: The bubble and in 1991 land and stock prices began a steep decline, within a few years reaching 60% below their peak. Economist Richard Koo wrote that Japan's "Great Recession" that began in 1990 was a " balance sheet recession ". It was triggered by a collapse in land and stock prices, which caused Japanese firms to become insolvent . Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment,

8591-439: The capital markets to acquire funds. The cozy relationship of corporations to banks and the implicit guarantee of a taxpayer bailout of bank deposits created a significant moral hazard problem, leading to an atmosphere of crony capitalism and reduced lending standards. In so doing they helped inflate the bubble economy to grotesque proportions." The Bank of Japan began increasing interest rates in 1990 due in part to concerns over

8712-424: The cash market, all of which are affected based on substantial movements in a broad market indicator. Since their inception after Black Monday (1987) , trading curbs have been modified to prevent both speculative gains and dramatic losses within a small time frame. There are three thresholds, which represent different levels of decline in the S&P 500 Index : 7% (Level 1), 13% (Level 2), and 20% (Level 3). For

8833-765: The coast of Japan. In the 2011 fiscal year, the domestic yield of crude oil was 820 thousand kiloliters, which was 0.4% of Japan's total crude processing volume. In 2019, Japan was the 2nd largest world producer of iodine , 4th largest worldwide producer of bismuth , the world's 9th largest producer of sulfur and the 10th largest producer of gypsum . Japan's service sector accounts for 68.7% (2017) of its total economic output. Banking, insurance, real estate, retailing, transportation , and telecommunications are all major industries such as Mitsubishi UFJ , Mizuho , NTT , TEPCO , Nomura , Mitsubishi Estate , Aeon , Mitsui Sumitomo , Softbank , JR East , Seven & i Holdings , KDDI and Japan Airlines counting as some of

8954-406: The country's money supply in order to raise expectations of inflation and spur economic growth. Initially, the policy failed to induce any growth, but it eventually began to affect inflationary expectations. By late 2005, the economy finally began what seems to be a sustained recovery. GDP growth for that year was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the growth rates of

9075-500: The crack that started the avalanche'. Research at the Massachusetts Institute of Technology suggests that there is evidence that the frequency of stock market crashes follows an inverse cubic power law . This and other studies such as Didier Sornette 's work suggest that stock market crashes are a sign of self-organized criticality in financial markets. In 1963, Mandelbrot proposed that instead of following

9196-414: The currency caused Japan to lose its status as the world’s third largest economy to Germany in nominal terms, which was approximately half the size of the country's economy a decade earlier. The Asahi Shimbun and other media outlets also reported that the impact of these sharp falls in the value of the currency had turned the Japanese yen into a junk currency . Factors such as an apparent end to

9317-468: The devastation of the Second World War to become a global economic powerhouse. The immediate post-war period saw Japan slowly recovering as a democratic nation under the Allied Occupation . The Korean War (1950-1953), which happened in its now divided former colony, boosted the economy, as Japan served as a major supply hub for U.S. forces. By the 1950s and 1960s, Japan’s economy had entered

9438-573: The effects of Abenomics, only 28 percent expected to see a pay raise, and nearly 70% were considering cutting back spending following the increase in the consumption tax. In early 2020, as Japan began to suffer from the COVID-19 pandemic , Jun Saito of the Japan Center for Economic Research stated that the pandemic's impact delivered the "final blow" to Japan's long fledgling economy, which had resumed slow growth in 2018. Economist Paul Krugman has argued that Japan's lost decades are an example of

9559-634: The effects of Lost Decades. However, several Japanese policymakers have attempted reforms to address the malaise in the Japanese economy. After Shinzō Abe was elected as Japanese prime minister in December 2012, Abe introduced a reform program known as Abenomics which sought to address many of the issues raised by Japan's Lost Decades. His "three arrows" of reform intend to address Japan's chronically low inflation, decreasing worker productivity relative to other developed nations, and demographic issues raised by an aging population. Initially, investor response to

9680-539: The end of May 2020, the stock market indices briefly recovered to their levels at the end of February 2020. In June 2020 the Nasdaq surpassed its pre-crash high followed by the S&P 500 in August and the Dow in November. The conventional assumption is that stock markets behave according to a random log-normal distribution . This implies that the expected volatility is the same all the time. Among others, mathematician Benoit Mandelbrot suggested as early as 1963 that

9801-485: The entire Japanese economy, over the period of 1995 to 2023, the country's nominal GDP fell from $ 5.33 trillion to $ 4.21 trillion, real wages fell around 11%, while the country experienced a stagnant or decreasing price level . Under deflation , the value of cash increases as time passes. In such a situation, Japanese companies began to cut wages, research and development , and other investments, opting to hold onto cash instead. This tendency, coinciding with

9922-620: The exchange rate on 13 April 2013. The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2024–2029). Inflation under 5% is in green. (in Bil. US$ PPP) (in US$ PPP) (in Bil. US$ nominal) (in US$ nominal) (real) (in Per cent) (in Per cent) (in % of GDP) The Japanese agricultural sector accounts for about 1.1% (2017) of

10043-576: The exchange with sell orders. The Dow fell 30.57 points to close at 230.07 on that day. The glamour stocks of the age saw their values plummet. Across the two days, the DJIA fell 23%. By the end of the weekend of November 11, 1929, the index stood at 228, a cumulative drop of 40% from the September high. The markets rallied in succeeding months, but it was a temporary recovery that led unsuspecting investors into further losses. The DJIA lost 89% of its value before finally bottoming out in July 1932. The crash

10164-426: The following conditions: a prolonged period of rising stock prices (a bull market ) and excessive economic optimism, a market where price–earnings ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants. Other aspects such as wars, large corporate hacks, changes in federal laws and regulations, and natural disasters within economically productive areas may also influence

10285-491: The following long stagnation. Additionally, Michael Schuman of Time magazine wrote that these banks kept injecting new funds into unprofitable " zombie firms " to keep them afloat, arguing that they were too big to fail . However, most of these companies were too debt-ridden to do much more than survive on bail-out funds. Schuman believed that Japan's economy did not begin to recover until this practice had ended. Eventually, many of these failing firms became unsustainable, and

10406-399: The general worries of stock market overvaluation, blame for the collapse has been apportioned to such factors as program trading , portfolio insurance and derivatives , and prior news of worsening economic indicators (i.e. a large U.S. merchandise trade deficit and a falling U.S. dollar , which seemed to imply future interest rate hikes). One of the consequences of the 1987 Crash was

10527-609: The head of the International Monetary Fund (IMF) warned that the world financial system was teetering on the "brink of systemic meltdown". The economic crisis caused countries to close their markets temporarily. On October 8, the Indonesian stock market halted trading, after a 10% drop in one day. The Times of London reported that the meltdown was being called the Crash of 2008 , and older traders were comparing it with Black Monday in 1987. The fall that week of 21% compared to

10648-534: The implications of their hypothesis on the basis of evidence that suggests that despite the ongoing difficulties in the Japanese banking sector, desired capital expenditure was for the most part fully financed. They suggest that Japan's sluggish investment activity is likely to be better understood in terms of low levels of desired capital expenditure and not in terms of credit constraints that prohibit firms from financing projects with positive net present value (NPV). Monetary or fiscal policies might increase consumption in

10769-503: The industry's total production, while offshore fishing by medium-sized boats makes up for more than half the total production. Deep-sea fishing from larger vessels makes up the rest. Among the many species of seafood caught are sardines, skipjack tuna , crab, shrimp, salmon, pollock , squid, clams, mackerel , sea bream , sauries , tuna and Japanese amberjack . Freshwater fishing, including salmon, trout and eel hatcheries and fish farms, takes up about 30% of Japan's fishing industry. Among

10890-643: The introduction of the circuit breaker or trading curb on the NYSE. Based upon the idea that a cooling-off period would help dissipate panic selling , these mandatory market shutdowns are triggered whenever a large pre-defined market decline occurs during the trading day . On September 15, 2008, the bankruptcy of Lehman Brothers and the collapse of Merrill Lynch along with a liquidity crisis of American International Group , all primarily due to exposure to packaged subprime loans and credit default swaps issued to insure these loans and their issuers, rapidly devolved into

11011-473: The largest companies in the world. two of the five most circulated newspapers in the world are Japanese newspapers . The Koizumi government set Japan Post , one of the country's largest providers of savings and insurance services for privatization by 2015. The six major keiretsus are the Mitsubishi , Sumitomo , Fuyo , Mitsui , Dai-Ichi Kangyo and Sanwa . Japan is home to 251 companies from

11132-507: The late 1980s, the Japanese economy experienced an asset price bubble caused by loan growth quotas dictated upon the banks by Japan's central bank, the Bank of Japan , through a policy mechanism known as the " window guidance ". As economist Paul Krugman explained, "Japan's banks lent more, with less regard for quality of the borrower, than anyone else's. In doing so they helped inflate the bubble economy to grotesque proportions." Economist Richard Werner writes that external pressures such as

11253-676: The mid-18th century, Edo had a population of over 1 million, while Osaka and Kyoto each had more than 400,000 inhabitants, becoming centres for trade and handicraft production. Rice, the economy’s base, was taxed at about 40% of the harvest and sold at the fudasashi market in Edo. Daimyō used forward contracts similar to modern futures trading to sell rice before harvest. During the sakoku period, Japan studied Western sciences and techniques ( rangaku ) through Dutch traders in Dejima, including geography, medicine, natural sciences, astronomy, and mechanical sciences. Japan reopened its economy to

11374-459: The money supply in Japan over the course of two years. Markets around the world have responded positively to the government's current proactive policies, with the Nikkei 225 adding more than 42% since November 2012. The Economist has suggested that improvements to bankruptcy law, land transfer law, and tax laws will aid Japan's economy. In recent years, Japan has been the top export market for almost 15 trading nations worldwide. In December 2018,

11495-403: The nearly 300 fish species in the rivers of Japan are native varieties of catfish, chub, herring and goby, as well as such freshwater crustaceans as crabs and crayfish. Marine and freshwater aquaculture is conducted in all 47 prefectures in Japan. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch, prompting some claims that Japan's fishing

11616-656: The northern part of Kyūshū ( Kitakyūshū ). In addition, a long narrow belt of industrial centers called the Taiheiyō Belt is found between Tokyo and Fukuoka , established by particular industries, that have developed as mill towns. Japan enjoys high technological development in many fields, including consumer electronics , automobile manufacturing , semiconductor manufacturing, optical fibers , optoelectronics , optical media , facsimile and copy machines , and fermentation processes in food and biochemistry . However, many Japanese companies are facing emerging rivals from

11737-510: The part of sellers, but because the NASDAQ market system failed. Deluged with sell orders, many stocks on the NYSE faced trading halts and delays. Of the 2,257 NYSE-listed stocks, there were 195 trading delays and halts during the day. The NASDAQ market fared much worse. Because of its reliance on a "market making" system that allowed market makers to withdraw from trading, liquidity in NASDAQ stocks dried up. Trading in many stocks encountered

11858-421: The path to economic prosperity, policymakers would have had to adopt policies that would first cause short-term harm to the Japanese people and government. Under this analysis, says Ian Lustick, Japan was stuck on a "local maximum," which it arrived at through gradual increases in its fitness level, set by the economic landscape of the 1970s and 80s. Without an accompanying change in institutional flexibility, Japan

11979-445: The producer. In the early Meiji period, the government built factories and shipyards that were sold to entrepreneurs at a fraction of their value. Many of these businesses grew rapidly into the larger conglomerates such as Mitsubishi . Government emerged as chief promoter of private enterprise , enacting a series of pro-business policies. Japan underwent significant economic transformation and rapid recovery and growth, emerging from

12100-454: The reasons behind the 1987 Crash. Stocks had been in a multi-year bull run and market price–earnings ratios in the U.S. were above the post-war average. The S&P 500 was trading at 23 times earnings, a postwar high and well above the average of 14.5 times earnings. Herd behavior and psychological feedback loops play a critical part in all stock market crashes but analysts have also tried to look for external triggering events. Aside from

12221-417: The remainder coming from the industrial sector. The automobile manufacturing industry , which is the second largest in the world, dominates the industrial sector, with Toyota being the world’s largest manufacturer of cars. Japan is often ranked among the world’s most innovative countries, leading several measures of global patent filings. However, its manufacturing industry has lost its world dominance since

12342-424: The same levels as 1995. And as a greater sign of economic malaise, Japan also fell behind in output per capita. In 1991, real output per capita in Japan was 14% higher than that of Australia, but in 2011 real output had dropped to 14% below Australia's levels. In the span of 30 years, Japan also experienced slower labor productivity growth than other countries. Whereas in 1990 it ranked sixth among G7 nations ahead of

12463-464: The second largest economy in the world in 1968 and remained so until 2010, and on a nominal per capita basis, the most high-income among the G7 countries in the 1980s and 1990s. In 1995, Japan’s share of the world’s nominal GDP was 17.8%, reaching approximately 71% of that of the United States. The Plaza Accord in 1985, an agreement among major economies to devalue the American dollar relative to

12584-449: The short run, but unless productivity growth increases, there is a legitimate fear that such a policy may simply transform Japan from a low-growth/low-inflation economy to a low-growth/high-inflation economy. In her analysis of Japan's gradual path to economic success and then quick reversal, Jennifer Amyx wrote that Japanese experts were not unaware of the possible causes of Japan's economic decline. Rather, to return Japan's economy back to

12705-550: The social sciences. After the Great Recession of 2007–2009, many Western governments and commentators have referenced the Lost Decades as a distinct economic possibility for stagnating developed nations . On 9 February 2009, in warning of the dire consequences facing the US economy after its housing bubble , U.S. President Barack Obama cited the "lost decades" as a prospect the American economy faced. And in 2010, Federal Reserve Bank of St. Louis President James Bullard warned that

12826-597: The statistics prove this assumption incorrect. Mandelbrot observed that large movements in prices (i.e. crashes) are much more common than would be predicted from a log-normal distribution. Mandelbrot and others suggested that the nature of market moves is generally much better explained using non-linear analysis and concepts of chaos theory . This has been expressed in non-mathematical terms by George Soros in his discussions of what he calls reflexivity of markets and their non-linear movement. George Soros said in late October 1987, 'Mr. Robert Prechter 's reversal proved to be

12947-781: The stock market fell and started to close down. Further bank runs were prevented due to the intervention of J. P. Morgan . The panic continued to 1908 and led to the formation of the Federal Reserve in 1913. The economy grew for most of the Roaring Twenties . It was a technological golden age, as innovations such as the radio, automobile, aviation, telephone, and the electric power transmission grid were deployed and adopted. Companies that had pioneered these advances, including Radio Corporation of America (RCA) and General Motors , saw their stocks soar. Financial corporations also did well, as Wall Street bankers floated mutual fund companies (then known as investment trusts ) like

13068-412: The summer of 1929, it was clear that the economy was contracting, and the stock market went through a series of unsettling price declines. These declines fed investor anxiety, and events came to a head on October 24, 28, and 29 (known respectively as Black Thursday , Black Monday , and Black Tuesday ). On Black Monday, the DJIA fell 38.33 points to 260, a drop of 12.8%. The deluge of selling overwhelmed

13189-416: The top 50. Many Japanese companies replaced a large part of their workforce with temporary workers, who had little job security and fewer benefits. As of 2009, these non-traditional employees made up more than a third of the labor force. For the wider Japanese workforce, wages have stagnated. From their peak in 1997, real wages fell around 13% by 2013, an unprecedented number among developed nations. Surveys by

13310-405: The total aquaculture production was predicted at 1,301,437 tonnes. In 2010, Japan's total fisheries production was 4,762,469 fish. Offshore fisheries accounted for an average of 50% of the nation's total fish catches in the late 1980s although they experienced repeated ups and downs during that period. Coastal fishing by small boats, set nets, or breeding techniques accounts for about one third of

13431-419: The total country's GDP. Only 12% of Japan's land is suitable for cultivation. Due to this lack of arable land, a system of terraces is used to farm in small areas. This results in one of the world's highest levels of crop yields per unit area, with an overall agricultural self-sufficiency rate of about 50% on fewer than 56,000 km (14 million acres) cultivated. Japan's small agricultural sector, however,

13552-503: The week of February 24–28, 2020, stock markets dropped as the COVID-19 pandemic spread globally. The FTSE 100 dropped 13%, while the DJIA and S&P 500 Index dropped 11–12% in the biggest downward weekly drop since the 2007–2008 financial crisis . On Monday, March 9, 2020, after the launch of the 2020 Russia–Saudi Arabia oil price war , the FTSE and other major European stock market indices fell by nearly 8%. Asian markets fell sharply and

13673-410: The world. Rice, the most protected crop, is subject to tariffs of 777.7%. Although Japan is usually self-sufficient in rice (except for its use in making rice crackers and processed foods) and wheat, the country must import about 50% of its requirements of other grain and fodder crops and relies on imports for half of its supply of meat. Japan imports large quantities of wheat and soybeans . Japan

13794-455: The world’s second-largest economy, a position it held until it was surpassed by China in 2010. The government played a crucial role through policies that promoted industrial expansion and technological advancement. Japan’s emphasis on quality control and continuous improvement ( kaizen ) further boosted its international competitiveness. By the 1980s, Japan was leading in a wide range of industries, including automotive and consumer electronics, and

13915-512: The zero-rate policy was ended. In 2008, the Japanese Central Bank still had the lowest interest rates in the developed world, but deflation had still not been eliminated and the Nikkei 225 has fallen over approximately 50% (between June 2007 and December 2008). However, on 5 April 2013, the Bank of Japan announced that it would be purchasing 60–70 trillion yen in bonds and securities in an attempt to eliminate deflation by doubling

14036-399: Was approximately half the size of the country's economy a decade earlier. While there is some debate on the extent and measurement of Japan's setbacks, the economic effect of the Lost Decades is well established, and Japanese policymakers continue to grapple with its consequences. Japan's economic miracle in the second half of the 20th century ended abruptly at the start of the 1990s. By

14157-398: Was by far the least visited country in the G7 despite being the second largest country in the group, and as of 2013 was one of the least visited countries in the OECD on a per capita basis. In 2013, international tourist receipts was 0.3% of Japan's GDP, while the corresponding figure was 1.3% for the United States and 2.3% for France. Stock market crash A stock market crash

14278-460: Was followed by the Great Depression , the worst economic crisis of modern times, which plagued the stock market and Wall Street throughout the 1930s. The mid-1980s were a time of strong economic optimism. From August 1982 to its peak in August 1987, the Dow Jones Industrial Average (DJIA) rose from 776 to 2722. The rise in market indices for the 19 largest markets in the world averaged 296% during this period. The average number of shares traded on

14399-412: Was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy. Economist Scott Sumner has argued that Japan's monetary policy was too tight during the Lost Decades and thus prolonged the pain felt by

14520-484: Was known for its formidable trade surplus and wealth. However, the late 1980s also saw the infamous Plaza Accord and the formation of an asset price bubble, with inflated real estate and stock market prices, setting the stage for the economic stagnation of the ' Lost Decades ' that followed. Growth slowed markedly in the late 1990s also termed the Lost Decade after the collapse of Japanese asset price bubble . As

14641-406: Was unable to adapt to changing conditions and even though experts may have known which changes needed to be made, they would have been virtually powerless to enact those changes without instituting unpopular policies which would have been harmful in the short-term. Lustick's analysis is rooted in the application of evolutionary theory and natural selection to understanding institutional rigidity in

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