During this restoration period unemployment had risen to 12 per cent by 1993, i.e. more than twice today’s level. Danish wage increases in 1993 were furthermore lower than among our trading partners. The relaxation of fiscal policy achieved in 1993 had an effect concurrently with a considerable stimulus to demand as a consequence of the extensive wave of mortgage conversions.
Another lesson from Japan is that if a burst bubble harms the balance sheets of the financial sector, the government needs to take immediate steps to restore the health of the financial system. This should involve structural improvements in the way banks operate, not bailing out insolvent institutions.