Under such circumstances, the Japanese economy has been put under very severe adjustment pressures on a number of fronts, including the deflationary impact caused by the bursting of the asset bubbles and intensified competition with emerging economies. These adjustment pressures may be divided into three broad categories.
The first is the adjustment pressure that has emerged as the result of various excesses during the bubble period and their subsequent bursting. The problems of excess capacity, excess debt, and excess labor of the corporate sector as well as the NPL problem of financial institutions fall into this category.