And the banking sector which had in the 1980s

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Unformatted text preview: the 1980s, crept up at an annual rate of barely 1½ per cent in the 1990s. And the banking sector, which had in the 1980s increasingly extended credit on the strength of appreciating land collateral, found itself saddled with a large amount of non-performing assets and drastically curtailed its lending. Failure to tackle these bad loans on the part of the government then added to the deflationary forces. Rather than providing funds to bail out the banks, the authorities hoped that growth would solve the problem (Mayer, 1999). Instead, the problem only worsened. Three further very specific shocks hit an already stagnating economy at different times in the decade. Between mid-1992 and mid-1995, the yen appreciated in real terms by as much as 50 per cent. While a good deal of that appreciation was subsequently undone, it is very likely that the loss of competitiveness suffered at the time nipped in the bud any tentative recovery that might otherwise have occurred. The same almost certainly happened in 1997 when, following somewhat faster g...
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