The Crisis of Over-Accumulation in Japan

Abstract

Japan has now been mired in economic stagnation, punctuated by recurrent recessions, for the past two decades. What are the causes of this longstanding malaise? Is it merely the natural consequence of financial retrenchment and the onset of a pervasive “liquidity trap” after the collapse of the “bubble” economy in the early 1990s, or does the present slump signify a more profound historical phase of structural decline? The aim of this study is to provide several tentative hypotheses. In the first section, some of the possible causes of this phase of prolonged stagnation will be examined. The next section provides a theoretical treatment of the dynamics of debt-deflation from a Minsky-Fisher perspective. The final section evaluates whether the historical evidence lends credence to the debt-deflation thesis.