Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan's growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan's experiences suggest four broad lessons. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. Third, well-calibrated macroeconomic stimulus can facilitate this adjustment, but carries increasing costs. And fourth, while judging the best time to exit from policy support is difficult, clear medium-term plans may help.

This paper draws out the parallels between Korea and Japan in terms of demographics, potential growth, balance sheets, asset prices and inflation. Korea’s demographic trends seem to track Japan’s with a lag of about 20 years. Low productivity in the service sector and labor market duality are common to both countries and need to be addressed with structural reforms. While Korea’s corporate balance sheets are stronger than Japan’s in the early 1990s, Korea needs to progress with the restructuring of nonviable firms to avoid the adverse consequences of delayed balance-sheet repair that Japan experienced. Given its strong fiscal balance sheet position, Korea can afford using fiscal policy actively to incentivize corporate restructuring and structural reforms and cushion their possible short-term adverse impact. Korea can prevent bubbles in asset prices that were at the origin of Japan’s initial crisis with the continued use of macroprudential policies. Although Korea does not appear to be headed toward deflation, new econometric analysis presented in the paper suggests that aging will exert a downward drag on its inflation going forward.

The post-Cold War era has been difficult for Japan. A country once heralded for evolving a superior form of capitalism and seemingly ready to surpass the United States as the world’s largest economy lost its way in the early 1990s. The bursting of the bubble in 1991 ushered in a period of political and economic uncertainty that has lasted for over two decades. There were hopes that the triple catastrophe of March 11, 2011—a massive earthquake, tsunami, and accident at the Fukushima Daiichi nuclear power plant—would break Japan out of its torpor and spur the country to embrace change that would restart the growth and optimism of the go-go years. But several years later, Japan is still waiting for needed transformation, and Brad Glosserman concludes that the fact that even disaster has not spurred radical enough reform reveals something about Japan's political system and Japanese society. Glosserman explains why Japan has not and will not change, concluding that Japanese horizons are shrinking and that the Japanese public has given up the bold ambitions of previous generations and its current leadership. This is a critical insight into contemporary Japan and one that should shape our thinking about this vital country.

This book is an authoritative account of the economic and political roots of the 2008 financial crisis. It examines why it was triggered in the United States, why it morphed into the Great Recession, and why the contagion spread with such ferocity around the globe. It also examines how and why economies - including the Eurozone, Russia, China, India, East Asia, and the Middle East - have been impacted and explores their response to the unprecedented challenges of the crisis and the effectiveness of their policy measures. Global Financial Contagion specifically looks at how the Obama administration's policy missteps have contributed to America's huge debt and slow recovery, why the Eurozone's response to its existential crisis has become a never-ending saga, and why the G-20's efforts to create a new international financial architecture may fall short. This book will long be regarded as the standard account of the crisis and its aftermath.

In responding to the global crisis, central banks in several advanced economies ventured beyond traditional monetary policy. A variety of unorthodox measures, including purchases of public and private assets, have significantly enlarged their balance sheets. As recoveries take hold, focus will increasingly shift from countering the Great Recession to orchestrating an exit and returning to a more normal monetary framework. Five years ago, as its economy recovered from a severe financial crisis, Japan attempted just such an exit. This note revisits the Bank of Japan’s experience and draws potential lessons for managing an orderly exit today, with a focus on technical aspects, practicalities, and communication strategies. While the nature of the assets acquired during the present crisis could pose additional complications, parts of Japan’s arsenal—communication, flexibility, a sufficient set of policy tools and a strategy for using them, safeguards against potential losses, the revival of risk appetite through decisive restructuring of balance sheets, and refinements to the monetary framework upon exit—also could be important this time around.

The lingering effects of the economic crisis are still visible—this shows a clear need to improve our understanding of financial crises. This book surveys a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises. Broad lessons on crisis prevention and management, as well as the short-term economic effects of crises, recessions, and recoveries, are discussed.

This book examines the economic policies that will underpin the evolution of growth in industrialised economies in coming decades. The change in focus of policymakers away from short-term regulation and policies towards problems of structural change is discussed in relation to the Taylor rule and Fisher relationship. Both empirical observations and quantitative analyses are utilised to explore diverse but interrelating topics, including interest rates dynamics, macroeconomic equilibrium, economic vulnerability, poverty and inequality, environmental sustainability, and monetary and fiscal policies. This book aims to propose policies that can produce economic growth without compromising social stability and environmental balances. It will be of interest to researchers and policymakers working within economic development and policy.