NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Causes of the Long Stagnation of Japan During the 1990s: Financial or Real?

Taizo Motonishi, Hirshi Yoshikawa

NBER Working Paper No. 7351
Issued in September 1999
NBER Program(s):   EFG

Corporate investment is the most important factor to explain the long stagnation of Japan during the 1990's. Using the Bank of Japan diffusion indices of real profitability' and banks' willingness to lend', we estimate investment functions for four groups of firms: large/small and manufacturing/non-manufacturing. Our results suggest that for large firms, financing constraints are not significant whereas the converse is true for small firms. A fall of investment during 1992-94 is largely explained by real factors. However, the credit crunch occurred beginning 1997 and it lowered the growth rate of GDP by 1.6%.

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Document Object Identifier (DOI): 10.3386/w7351

Published: Motonishi, Taizo and Hiroshi Yoshikawa. "Causes Of The Long Stagnation Of Japan During The 1990s: Financial Or Real?," Journal of the Japanese and International Economies, 1999, v13(3,Sep), 181-200. citation courtesy of

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