Japan and the United Sates In order to find out the effect of balance sheet adjustments after the bursting of a bubble, let me first clarify who leveraged during the bubble periods. In Japan, it was the corporate sector, especially small to medium-sized firms, which for the first time gained access to large banks after the so-called financial liberalization (Fig. 2.1).
The corporate sector’s loan-to-GDP ratio increased by 29 percentage points in the ten years before the bubble burst in 1991. In the United States, it was the household sector that leveraged, especially in housing. The household sector’s housing loans-to-disposable income ratio jumped by 39 percentage points in the ten years before the bubble burst in 2007.