The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Inside Investment: Japanese lessons

Much is made of Ben Bernanke’s academic work on the Great Depression. However, the Fed chairman seems to making policy with one eye on the recent Japanese debt deflation cycle.


The drop-out rate from Japanese courses at UK universities is extremely high. Most students take it up from scratch and it proves a challenge too far for all but the most linguistically gifted. Japanese economic history can at least be studied in translation, although it still makes for difficult reading. Vacillation, combined with policy missteps following the pricking of the housing and stock market bubbles in the early 1990s, condemned Japan to a debt deflation cycle not seen in a developed economy since the Great Depression. The country is only now beginning to recover.

Central bankers looking for a guide of what not to do in the present credit crunch and economic slowdown could do worse than turn their attention to what unfolded in Japan. Fortunately for the US and the rest of the world, Federal Reserve chairman Ben Bernanke appears to be a keen student. The lessons are many and varied. The biggest single mistake the Japanese authorities made was to stay within a traditional monetary mindset for far too long. This lack of imagination was compounded by the catastrophic decision to raise interest rates in 1998, tipping the economy into a vicious deflationary spiral.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree