KENJI ARAMAKI Japan’s Long Stagnation, Deflation, and Abenomics Mechanisms and Lessons Japan’s Long Stagnation, Deflation, and Abenomics Kenji Aramaki Japan’s Long Stagnation, Deflation, and Abenomics Mechanisms and Lessons Kenji Aramaki Tokyo Woman’s Christian University Tokyo, Japan University of Tokyo Tokyo, Japan ISBN 978-981-13-2175-7 ISBN 978-981-13-2176-4 (eBook) https://doi.org/10.1007/978-981-13-2176-4 Library of Congress Control Number: 2018953058 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed 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East, Singapore 189721, Singapore Preface The objective of this book, which covers the Japanese economy since the 1980s, is to identify the mechanism of formation and collapse of a huge bubble and the subsequent long economic stagnation and deflation and to discover challenges that the current Japanese economy faces I worked mainly in the field of international finance in the Ministry of Finance of Japan for about 30 years and then moved to Tokyo University, where I taught international economics for more than 10 years The reason why I have written a book on the Japanese economy, which is not strictly my specialty, is that I have had a strong desire to find out an answer to my long-held questions, that is, “Why did the Japanese economy fall to its current situation?” and “Was it inevitable?” It was 1976, when I started to work, more than 40 years ago The Japanese economy at that time was dynamic and filled with increasingly strengthened confidence At the height of the euphoria of the bubble of the late 1980s, I was working as economist at the International Monetary Fund Personally, I did not like what was going on with the Japanese economy at that time, but my confidence in the strength of the Japanese economy did not change Even after the collapse of the bubble in the 1990s, I felt that the Japanese economy would be able to return at any moment to the previous conditions, which had been filled with vitality However, the reality did not turn out that way The Japanese economy experienced a serious financial crisis in the late 1990s, and deflation set in Even after entering the 2000s, low growth continued, and the Japanese economy lagged behind the growth of the global economy for decades Japan held a share that was higher than 9% in the world exports of goods v vi PREFACE and services in the first half of the 1990s, but at present it is less than half that, at about 4% China’s nominal GDP, which was 18% of Japan’s nominal GDP in 1996, is 2.3 times larger than that of Japan, as of 2017.1 No one at that time expected to see the economy as it is in 2017, and I have thought that it is the responsibility of our generation to answer “why?” However, the work to find out an answers presented many difficulties, as there were limited opportunities to exchange views outside the field of my expertise, which is international finance I chose, for the first time, to examine the issues of the Japanese economy as a topic in a seminar class that I taught at the Faculty of Arts and Sciences of Tokyo University in the summer term of 2011, and I started to read extensively the relevant articles and materials In 2014, I was awarded the opportunity to conduct research as a visiting professor at the School of Oriental and African Studies (SOAS) of London University There, I gave lectures on the Japanese economy as a guest lecturer, while conducting research on international financial crises Preparatory work for these guest lectures motivated me to further analyze the Japanese economy Since the summer of 2015, when I left SOAS, I have given presentations on the Japanese economy in London, Berlin, and Zurich at the conferences of the Japan Economy Network (JEN), which is an international network of researchers on the Japanese economy that my colleagues at the SOAS, including Dr Ulrich Voltz, Prof Machiko Nissanke, and Dr Sotoshi Miyamura, and myself organized in 2015 at a conference, together with the economists in attendance The book gradually came into a concrete shape, and it has taken more than seven years to complete The central argument of the book is that, at the center of the anomalies and difficulties of the Japanese economy over an extended period of time including formation and collapse of the bubble, the financial crisis, and deflation, were corporate behaviors that have changed while showing substantial fluctuations For example, the biggest negative legacy that the bubble left with Japan was excess assets (those assets for which sufficient demand is not expected and, therefore, are necessarily unprofitable) of the corporate sector The reason why the economy did not show a strong growth for a long time after the collapse of the bubble is that, as sales by companies stopped growing and economic growth decelerated following IMF World Economic Outlook, April 2018 Nominal GDP in terms of home currency of each country is converted to the dollar using market exchange rate PREFACE vii the burst of the bubble, the excess assets (unprofitable assets) expanded Companies could not swiftly dispose of such excess assets, and investment was depressed for an extended period of time Furthermore, despite sales not increasing, wages continued to increase in the early years after the collapse of the bubble, and profits of companies were further depressed by this factor Companies’ responses at that time to the problems brought about by the collapse of the bubble were “passive,” and this passivity led to a lengthening of the economic stagnation When the financial crisis broke out in the late 1990s, under the deteriorating business conditions and with a sharp aggravation of funding environments, which were described as not only “new loan curbing” but also as “outstanding loan withdrawing,” company response shifted at a stroke to a “crisis response.” Companies forcefully proceeded with wage reduction, replacement of regular workers with non-regular workers, further restraint of investment, and strengthening of their net asset position Around this period, deflation started with the declining wage level The Japanese economy slowed further, and fundamental changes occurred with the financial crisis.2 Due to such responses by companies, excess assets together with excess debts and excess employment were removed by the mid-2000s, and the economy returned to the normal However, a defensive attitude of companies that emerged after the financial crisis was maintained, such that restraint on investment and wages continued (“continued defensiveness” emerged) The biggest characteristics of the stagnation of the Japanese economy are, first, that it took as long as 15 years from the collapse of the bubble in the early 1990s to the elimination of the excesses and, second, that a defensive attitude on the part of companies continued (it has not been eliminated even now), even after the problems with the balance sheets of companies, which lay at the heart of the difficulties, had been rectified This book argues that behind the defensive attitude of companies is the low-growth expectations held by companies Low-growth expectations became firmly rooted and settled under the reality of low growth that Companies changed their behavior significantly after the financial crisis Many Japanese companies, which once placed a high priority on employment, forcefully pressed ahead with labor cost reduction through wage cuts and replacement of regular workers by non-regular workers, while protecting the employment of existing workers (Wakita [2014] described this as “fortified Japanese companies”) Under such developments, there has emerged serious social costs, such as very low marriage rates of young non-regular workers (see Chap. 7) Defensive behaviors of companies are producing negative externalities viii PREFACE extended over a long period of time, from the 1990s (the average growth rate in 22 years from 1991 to 2012 was 1.0%) The total amount of (nominal) sales of all the profit-making companies in Japan increased by merely 1.9% from fiscal 1990, when the collapse of the bubble started, to fiscal 2016.3 Japanese companies have been living in a world where growth does not exist for more than a quarter of a century Regarding the low-growth expectations formed under such reality, one view argues that, as the problems with the balance sheets of companies were resolved, the low-growth expectation has become not so much a reflection of economic reality, but rather a result of a habitualized way of thinking (i.e., a mindset), and therefore, it will change if the mindsets of companies are changed In contrast, there is another view that argues that the low-growth expectations have a rational, most likely structural basis A representative point of the latter view stresses the expected shrinkage of domestic markets due to population decline As I explain in the book, I not think the latter view (one that contends that long-term and structural factors brought about the defensive attitudes of companies or low-growth performance) applies to the major part of the two-decade stagnation from the collapse of the bubble to the beginning of the 2010s (this is the period which we call “the long stagnation period” in the book) More specifically, I not think that the view can explain the mechanism of stagnation during the period up to the mid2000s, when the corporate sector finally eliminated the aftereffects of the collapse of the bubble In particular, although it is highly possible that expectation of population decline will restrict corporate behaviors in the future, it is only since the second half of 2000s that the population decline has become a reality,4 and it was not so long ago, probably only after the beginning of the 2010s, when the population decline was widely recognized as an important problem by the general public In this book, it is argued that the fundamental mechanisms for the major part of the long stagnation was, one, the lengthening of the process of disposition of excess assets and, two, the strengthened defensiveness of companies after the financial crisis Furthermore, while it is difficult to clearly distinguish the degree of their influence, factors arising from the defensive mindset (the Ministry of Finance of Japan “Financial Statements Statistics of Corporations by Industry.” Statistics Bureau, Ministry of Internal Affairs and Communications, “Population Estimates.” PREFACE ix part of defensiveness that does not seem to have a rational basis) still remain in the mechanism of low-growth expectations by companies and low-growth performances since the mid-2000s to the present.5 Therefore, attempts to change such mindsets (e.g., governance reform that encourages companies to employ outside directors in their management, promotion of wage increases, and facilitating realization of higher growth than before through alteration of foreign demand to domestic demand by promoting such activities as tourism and inward foreign investment) are thought to be effective However, the mindset of companies cannot explain the whole process and, particularly for the future, there is no denying that substantive issues still exist The comprehensive policy package that has been implemented by the Abe administration, known as Abenomics, aims at both encouraging changes in the mindset and addressing the substantive issues for the future The package has brought about some positive outcomes However, corporate behaviors have not significantly changed in a positive direction, and the process is only half accomplished At the same time, concerns are rising about by-products, including the declining growth contribution of consumption, accumulation of potential risk in the financial system, and continued significant deterioration of the fiscal position This describes the present condition of the Japanese economy.6 In writing this book, many people have extended their help to me I would like to thank the undergraduate students who passionately participated in my seminar class in the summer of 2011, in which I first started to examine the Japanese economy intensively, and the undergraduates, graduates, and alumni of my seminar who participated in “the workshop on the Japanese economy,” which I held in the Faculty of Arts and Sciences of Tokyo University I am also very grateful to Dr Takashi Omori (exdirector of the division in charge of writing the “Economic White Paper” in the Economic Planning Agency of Japan) who read the manuscript and gave very many fundamental as well as technical comments; Dr Teru See Supplement to Chap 6, in which the mechanism of stagnation is shown, with a focus on company behaviors, by flowcharts, respectively, for three periods: “Period of passive response” immediately after the collapse of the bubble; “Period of crisis response” after the financial crisis in the latter half of the 1990s; and “Period of continued defensiveness” from the mid-2000s While the objective of the book is to identify the mechanism of anomalies and difficulties of the Japanese economy over the past 30 years from the bubble formation to present, it briefly touches on measures to deal with current challenges in the Chap x PREFACE Nishikawa (Associate Professor, Yokohama National University) who offered many beneficial comments; Mr Masaru Homma (The European Bank for Reconstruction and Development (EBRD)), Dr Kunio Mikuriya (The World Customs Organization (WCO)); and Mr. Takao Tashiro (Japan Weather News) who gave useful comments on part of the book, Mr Mahito Sugaya (Certified Accountant) who gave very insightful comments based on real-world experience; and Dr Hiroshi Shibuya (Emeritus Professor, Tokyo University) who commented on the basic theme of the book I am also very thankful to Professors Martin Fransman and Matthias Zachmann of The University of Edinburgh, who first encouraged me to write a book, after I gave a seminar in Edinburgh in 2015, on the issue of long stagnation I would like to extend my thanks to my colleagues and the administrative staff of the Department of Advanced Social and International Studies, School of Arts and Sciences, University of Tokyo, to which I belonged until March 2017 They kindly allowed and supported my sabbatical leave As stated before, guest lectures that I gave during the sabbatical leave were a drive for the analysis in this book I would like to express my gratitude to Dr Machiko Nissanke, Professor Emeritus of SOAS, who accepted me as a visiting professor at SOAS; to SOAS Senior Lecturer Dr Ulrich Voltz, who supported my research on the Japanese economy through formation and management of JEN that I noted before, and to SOAS Senior Lecturer Dr Satoshi Miyamura, who gave advice on the lectures on the Japanese economy at SOAS. In particular, I am very grateful to Professor Emeritus Machiko Nissanke, who provided me with a comfortable research environment at SOAS and took time to usher a manuscript of the earlier version of the book, first drafted based on lecture notes, into publication I am also thankful to the Tokyo Woman’s Christian University for the current working environment, which they have provided for my research I am also very grateful to Ms Patricia K Mason, who thoroughly reviewed the manuscript and offered very insightful and superb editorial comments that greatly improved the manuscript While I have worked for the Ministry of Finance of Japan for about 30 years, I did not become directly engaged in the issues that were most relevant to the themes of this book I would like to make it clear that the entire contents of the book are based on public information and incorporate my personal thoughts They not represent views of any institution that I belonged to in the past Data and their interpretations are mine, and if there are any misunderstandings or insufficiency, they are solely my responsibility Bibliography 353 Miyagawa, Tsutomu (2003) “‘Ushinawareta 10 nen’ to Sangyo Kozo no Tenkan” (“Lost Decade” and Changes in Industrial Structure) In Ushinawareta 10 nen no Shinn-in Nanika, (What is the Real Cause of the Lost Decade?), edited by Kikuo Iwata and Tsutomu Miyagawa, Economics Series Toyo Keizai Shimpo Sha Miyao, Ryuzo (2004) “Ginko Kino no Teika to 90 nendai Iko no Defure Teitai— ‘Kashi Shiiburi’ Setsu to ‘Oigashi’ Setsu no Kento” (Deterioration of Banks’ Function and Deflationary Stagnation since the 1990s— “Credit Crunch” Theory and “Rescue Loans” Theory) In Ronso nihon no keizai kiki (Debate on Japan’s Economic Crisis), edited by Koichi Hamada and Akiyoshi Horiuchi Nihon keizai Shimbun Sha Miyazaki, Giichi (1992) Fukugo Fukyo—Posuto Baburu no Shohosen wo Motomete (Complex Recession—Seeking Prescriptions in the Post-Bubble Era) Chuo Koron Sha Motani, Kosuke (2010) Defure no Shotai—Keizai Jinko no nami de Ugoku (The True Origin of Deflation: The Economy Moves by the Demographic Waves) Kadokawa One Tema 21 Nakagawa, Satoshi (1996) “Wagakuni Kinnyu Kikan no Furyo Saiken no Genjo nituite” (On the Current Status of Non-Performing Loans of Japanese Financial Institutions), Ministry of Finance, Fainansu October Nakahara, Nobuyuki (2006) Nichigin Dareno Monoka (Who is the BOJ for?) 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11, 15–17, 22, 29–32, 83, 87n3, 102, 198, 212, 271, 285–335 chronology of, 335–338 foreign exchange and stock markets in, 294–334 Agency of the Ministry of Economy, Trade and Industry, 143n22 Ahearne, Alan, 199, 200, 203, 205–207 Annual Economic and Fiscal Report, 205n12 Aoyagi, Chie, 331n25 Asset price inflation, 14, 33–35, 60, 83 transformation to bubble, 35–41 Assets, changes in size of (mid-1980s), 235–238 Assets of companies, 225–231 B Balance sheet, vii, viii, 4, 16, 105, 120, 133, 139, 141, 142, 162, 163, 166, 174, 201n10, 211, 225, 232, 243, 249, 269 damages of, 112–116 Bank for International Settlements (BIS), 141n20 Banking Bureau, 145, 147, 148n32 Bank of Finland (BOF), 151 Bank of Japan (BOJ), 22, 29, 85, 136, 138, 139, 146–148, 204, 288n4, 295, 318n15 monetary policy, 199–207 QEP, effects of, 211–214 Basic Land Law, 84 Note: Page numbers followed by ‘n’ refer to notes © The Author(s) 2018 K Aramaki, Japan’s Long Stagnation, Deflation, and Abenomics, https://doi.org/10.1007/978-981-13-2176-4 361 362 INDEX “Basic Policy on Economic and Fiscal Management and Reform 2015,” 286, 291 BOJ economists’ views, 209–210 Bretton Woods, Bundesbank, 85 Bust, 114n19 C Cabinet Office, 324 Capital-asset ratio, 138n13 Capital injection, 137, 138, 149 Case of Scandinavia, 149 Cash flow, 243 China, vi, 5, 6, 8, 9, 9n3, 90, 192, 261, 263 ratio for, 5–6 Chinese economy, Collective decision-making system, 140 Commercial Law, 143n21 Consumer Price Index (CPI), 190, 275, 310 Consumption, 304–305 Conventional transmission mechanism of monetary policy, 208 Corporate bankruptcies, 154 Corporate governance system, 140 Corporate sector, 148 CPI, see Consumer Price Index Crisis response, vii, 4, Crisis Response period, 26 Cumulated Diffusion Index, 97, 99, 104 D Danish flexicurity model, 331n25 Deceleration process, 154 Defensive behaviors of companies, 167 Deflation, 160 causes of, 192–198 in Japan, causes of, 268–271 and monetary policy, 189–215 Demand factor arguments, 196–197 Demand-side factor views, 14, 89, 92–94 Democratic Party (DP), 286 Deposit Insurance Corporation (DIC), 133n3 Deposit Insurance Law, 136–138, 136n9, 137n11 Deposit protection, 140n16 Diffusion index, development in, 97–100 Direct disposition, 141, 141n18 Discount rate, 86 Disposition types, 140n18 Downward adjustment, 16, 24, 50, 183, 255 of growth expectation, 109–112 E Early Strengthening Law, 138 Economic cycles, 98 “The Economic Measures for Realization of Virtuous Cycles,” 290 “The Emergency Economic Measures for the Revival of Japan’s Economy,” 290 Emergency Economic Package, 139 Employment conditions, 163, 165, 257, 330 elimination of, 163 Employment income, 264 Excessive production capacity, 23, 162 elimination of, 162–163 Exchange traded funds (ETFs), 288 Expansion phase, 99n9 Export, 304–305 price, 266 price index, 260, 261, 261n14 External economic environments, 163–166 INDEX F Financial crisis, 17, 24n6, 26, 234 bank failures, 130 breakout of, 129–130 comprehensive resolution framework for, 161 fundamental changes in, 153–161 and its impacts, 102, 103, 129–161 NPL problem, 131–135, 140–153 NPL problems addressed, 135–140 Financial Function Early Strengthening Law, 138 Financial institutions, 141n19 Financial liberalization, 13, 149 Financial Reconstruction Administration (FRA), 138 The Financial Revival Program, 139, 169 Financial sector, 148 problem arguments, 197–198 problem views, 15, 89, 95 Financial Statement Statistics of Corporations by Industry, 180 Financial Supervisory Agency (FSA), 137n12 Finland, 151 First Abe Administration (September 2006–August 2007), long recovery period in, 169–171 Fiscal Investment and Loan Program (FILP), 327n24 Fiscal policy, 116–118, 161, 289–292 problem with, 93 Fiscal stimulus, 289–290 Fixed assets, 227, 228 Foreign direct investment (FDI), 167, 168, 227n3 Fukuda, Shin-ichi, 297, 298 G Ganelli, Giovanni, 331n25 GDP, 322 363 deflator, 191, 191n1, 193–196 gap, 275–276, 323 statistics, 112 GDP growth, 151, 300–301 compare with other countries, 88 compare with past, 87 Global Financial Crisis (GFC), period IV (2008–2012), 175–178 “Global financial crisis and after,” 102, 103 Government expenditure, 301, 306 dependence of growth on, 327–330 Government Guarantee Fund (GGF), 151 Government injected funds, 151 Government response, 160–161 Government’s macroeconomic policy, 153 Growth strategy, 292–295, 292n8 H Hashimoto (Prime Minister, LDP), 148n33 Hayami (Governor), 199, 205, 205n11, 205n12, 206, 206n13, 206n14, 207n16 Hokkaido Takushoku Bank, 18, 130, 137 I Import price, 266 Indirect disposition, 140, 141n18 Industrial Revitalization Corporation, 139 Initial adjustment period, 101–121 Insolvent company, 143 Interbank market participants, 130 Interest rates, 200 Interest-bearing debt, 163–164 International Monetary Fund (IMF), 114n19 364 INDEX Investment, company profit and, 310–312 Investment restraint by companies, 317–324 mechanism of, 239–249 Iwata, Kikuo, 192 J Japan, vi, viii, 2, 4–6, 8–10, 12, 13, 18, 19, 23, 29–33, 38, 39, 41, 43, 46, 48, 50, 51, 54, 55, 57, 59, 60, 62, 64, 66–69, 76, 88, 90, 107, 111n16, 112, 119, 121, 130, 138, 149, 152, 160, 162, 175, 189–191, 200, 207, 222, 238, 255, 257, 258, 261, 262, 277, 291, 298, 299, 318–320, 322, 330 collapse of bubble economy in, 83–121 deflation in, 190–192 Financial Big Bang, 148n33 import penetration, 193 Japan Economy Network (JEN), vi Japanese economy, v, 1, 4, 10, 19, 171–174, 189, 190, 221, 257–260, 270 assessment of abenomics and challenges for, 315–334 Japanese long-term Government Bonds, 29, 72, 210–212, 288, 289, 337, 338 The Japan Institute for Labor Policy and Training, 326n22 Japanese real estate investment trusts (J-REITs), 288 Japan Revitalization Strategy, 30 “Japan Revitalization Strategy—Japan is Back,” 292 Jinushi, Toshiki, 203 K Keynesian economics, 90 Koizumi administration (April 2001– September 2006), 139 long recovery period under, 169–171 Kousai, Yutaka, 32n10 Kuroda Bazooka, 287–289 Kuroda (Governor), 189, 198 L Labor cost, 169 restraint, 257–263 Labor market, 28, 31, 206n12, 257, 311–316, 325, 326n23, 331–332n25 duality of, 325 Land price surge, 84 Land prices, 114–116, 133 tax, 86 Land use regulation, 84 Law Concerning Emergency Measures for the Reconstruction of the Financial Functions, 137 Law Regarding Emergency Measures for Financial Stability, 137 Liabilities, 16, 24, 107, 108, 119, 151, 162, 164, 176, 215, 222, 232, 233, 235–239, 242, 244, 249, 257, 268, 269 of companies, 225–231 Liberal Democratic Party (LDP), 86n2, 139, 286 Liquid assets, 182, 225–227, 229, 235 Liquid liabilities, 229, 230 Long recovery period III (2002– 2007), 5, 11, 16–21, 98, 101–103, 115, 161–175 fundamental changes in, 166–170 under the Koizumi Administration (April 2001–September 2006) INDEX and the First Abe Administration (September 2006–August 2007), 169–171 Long stagnation, viii, 2–4, 14–17, 21, 83–121 in Japan, causes of, 268 Long-Term Credit Bank (LTCB), 18, 130, 137, 138, 145n24 Losses of companies, 222 Lost Decades, 103 Low-growth expectation, vii–ix, 10, 27, 31, 285, 317, 319, 320, 330 M Macroeconomic policy, 53, 55, 58, 60, 120, 153, 161, 174, 196, 316 Medium-sized banks, 136 Ministry of Finance (MOF), 84, 86, 111n16, 136, 137n12, 144–147, 147n30, 148n33, 152, 180 Miyao, Ryuzo, 197 Miyazawa (Prime Minister), 146 MOF, see Ministry of Finance Monetary base control, 287 Monetary policy, 85, 94, 117–119, 161, 287 assessment of, 198–214 conventional transmission mechanism of, 208 deflation and, 189–215 Mori, Naruki, 200 Motani, Kosuke, 275–277, 276n18, 318n16 Motonishi, Taizo, 197 N Nakaso, Hiroshi, 129n1, 135, 135n8, 136n9, 139n15, 147, 148 Nakasone administration, 12 Nationalization, 138 365 Negative interest rate, 288 Net assets, 235 Nikkei 225, 297 Nikkei Stock Average, 86 1956 Economic White Paper, 32n10 Nippon Credit Bank (NCB), 130, 138 Nishimura, Kiyohiko, 139n15 Noda (Prime Minister), 294 Noguchi, Asahi, 195n3 Nominal GDP, vi, 1, 7, 14, 15, 90–92, 95, 96, 267, 277, 280 in Japan, 90, 91 Nominal wages, 157, 275 Non-performing loan (NPL) problem, 18, 131–135 addressed, 135–140 cost of holding in, 141–144 government solving in, 144–153 methods of disposition of, 140–141 private sector to resolve, 140 Non-regular workers, 157–158 Norway, 150 NPL, see Non-performing loan O Oda, Nobuyuki, 210 Okina, Kunio, 210 “Outline of Emergency Land Measures,” 84 “Outlook for Economic Activity and Prices,” 289, 289n5 P Passive response, “Passive response period,” 25 Payoff cost, 136n9 Period before the bubble, 149 “Period of crisis response,” 238 “Period of passive response,” 238 Period I, 104–106 366 INDEX Period IV (2008–2012), 20 Physical assets, 227n2 ratio of, 240 Population decline, 332 “Population statistics data (2017 revised version),” 319n17 Postwar history, 130 Potential growth rate, 324 Price, 306–310 Price stability target, 287, 306 Primary balance, 291n7 Private investment, 105–116, 243 growth contribution of, 97–98 Profits of companies, 222–224 Public funds, 139 Q QQE, see Quantitative and Qualitative Monetary Easing “QQE with a Negative Interest Rate,” 289 “QQE with yield curve control,” 289 Quantitative and Qualitative Monetary Easing (QQE), 29, 189, 288, 289 adoption of, 198–199 Quantitative easing policy (QEP), 189 by BOJ, 210–211 Quantity theory of money, 196n4 R Reagan administration, 12 Real economy, 211, 317, 3258 abenomics and, 298–315 Reconstruction Law, 137, 138 Resona Bank, 139n15 Resona Group, 139 Return on asset (ROA), 27n8, 131, 132, 252, 252n11 S “St Petersburg Action Plan,” 291 Sanyo Securities, 129, 137 Savings Bank of Finland (SBF), 151 Second World War, 130 Shimpo, Seiji, 192 Shirakawa, Masaaki, 29, 211, 276, 277n19, 287n3 Single Open Ended Contract (SOEC), 331n25 Small and medium enterprises (SMEs), 143, 155 Small-sized banks, 136 Stagnation of wages, 143 Stagnation period, 14, 83, 96, 101 characteristics of, 96–97 Stagnation, three stages mechanism of, 271–274 Stock adjustments, 16, 106–109, 111, 162, 241, 269 Stock price, 30, 34, 39–41, 79, 85, 104, 112, 133, 139n15, 141n20, 147, 201, 295–298, 300, 311, 315 Supply-side factor, 14 views, 89–93 “Sustained defensiveness,” “Sustained defensiveness period,” 26 Sweden, 151 T Takenaka Plan, 169 Taxation areas, 84 Taylor rule, 200, 202, 203 Terms of trade, 261, 266, 267 “Three arrows,” 29 “Three excesses” argument, 162 INDEX Tochi Shinwa, 148 Tokuyo City Bank, 130, 137 Tokyo, 11 Tokyo Kyodo Bank (TKB), 136 Total asset turnover ratio, 239n6 Total fertility rate, 318 Trade dependency, 172 The true origin of deflation, 275 U Unemployment rate, 88–89, 99–100, 155–157, 257 USA, 1, 5, 6, 9n3, 12, 43, 44, 46, 47n12, 48, 50–52, 55, 56, 60, 62, 64, 69n27, 73, 75, 76, 120, 141n20, 200, 277 economy recovered, government, 367 W Wage restraint, 263–267, 324–325 mechanism of, 249–258 “Work style reform,” 326n23 World War II, 130 Y Yamaguchi, Yutaka, 207 Yamaichi Securities, 130, 137 Yen-dollar rate, 294 Yield curve control, 289 Yoshikawa, Hiroshi, 197, 197n5 Yoshimasa Nishimura, 86n2 Z Zero interest rate, 208–209 Zero interest rate policy (ZIRP), 22 Zombie company, 142 ...Japan’s Long Stagnation, Deflation, and Abenomics Kenji Aramaki Japan’s Long Stagnation, Deflation, and Abenomics Mechanisms and Lessons Kenji Aramaki Tokyo Woman’s... including the formation and collapse of a huge bubble, a two-decade -long economic stagnation, and chronic deflation, with an aim of identifying the mechanisms and drawing lessons for future economic... yen to the dollar and real and nominal effective exchange rate (2010 = 100) 111 Capital gains and losses accruing to land and stocks (in GDP ratio)113 Outstanding balance of long- term debt of