Political-Economic Analysis of the Bubble Economy and Stagnation

Abstract

After the bursting of the economic bubble in 1990, the Japanese economy has continued to stagnate. Abenomics has managed to weaken the yen and increase stock prices through the Bank of Japans extending lines of credit. However, it failed to bring the overall economy back on track. This article will look at the reasons behind the stagnation of the Japanese economy from historical points of view. First, it argues that the economic bubble was created in order to reconstruct the US economy. It also emphasizes that the stagnation of the Japanese economy comes from two reasons—innovative efforts in the Japanese economy being unfruitful and long-term employment practices, which used to sustain Japanese-style management, becoming no longer viable after the economic bubble burst in Japan. Furthermore, it highlights that the stagnation also comes from the fact that the Japanese government has accepted structural reforms that the US demanded. It is important for the Japanese people to establish an administration that would not heavily rely on the US in order to overcome the stagnation.