Faced with deteriorating business performance, they responded by overhauling their cost structure, cutting costs in, for example, labor -- including investment in human resources -- research and development (R&D), and depreciation expenses, while maintaining their existing business portfolios. This gave rise to excessive competition among firms in Japan and a continued decline in prices.
Furthermore, long-term deflation made the recovery of investment costs increasingly unlikely, which, along with other factors including those just mentioned, caused more firms to shy away from investment and the pursuit of innovation.