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Unformatted text preview: 80s asset-price
bubble was clearly what triggered a long period of
low growth. Without it, much of what went wrong
in the 1990s would probably never have happened.
The subsequent sudden swings in the real exchange
rate, in the stance of fiscal policies, and in Asian
growth depressed activity at specific points in the
decade. More importantly, by heightening the climate of uncertainty, these various subsequent shocks
must also have destabilized expectations.
(ii) Longer-run Supply Problems
The alternative view of Japanese difficulties would
put less stress on short-run demand swings and
more on longer-run supply and institutional features.
In this view, discussed in the paper by Hiroshi
Yoshikawa in this issue, Japan’s longer-run growth
is bound to slow down. One reason for this is the
gradual end to catch-up opportunities. A further
major reason is the expected sharp decline in the
country’s population and the even sharper rise in the
proportion of old people it will have to care for. As
a result, it is argued,...
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- Summer '13