Indeed, during the boom, Japanese regulations that allowed banks to count as capital unrealized gains from equities may have contributed to banks' appetite for equities during the stock market run-up and to financial instability as the stock market collapsed.
After the bursting of the bubble, policymakers did not quickly resolve the fragility of the banking sector, thereby allowing conditions to worsen as banks kept lending to inefficient, debt-ridden, so-called zombie firms. On the other hand, Japan's experience does not support the need for preemptive monetary policy actions to deflate a bubble, as some commentators have suggested.