I. Developments in Japan’s economy during the lost decades  As is well known, Japan’s economy has been mired in stagnation since the 1990s. On the other hand, what is less well known, especially abroad, is that the challenges that Japan’s economy has faced during this prolonged stagnation have differed over time.
Put simply, until the early 2000s, the main challenge consisted of dealing with the instability of the financial system and deleveraging in the banking sector brought about by the collapse of the asset bubble, and of resolving the so-called “three excesses” in the corporate sector, consisting of excess debt, excess capacity, and excess employment.