Whether or not we are in a new economy, or a new information revolution, it would be unwise to conclude that traditional laws of economics no longer apply. There are new factors, but, whether these are a temporary phenomenon or a profound change, only time will tell.
The interaction of macroeconomic weakness and instability in the banking system exacerbated the downturn. Through the 1990s the Bank of Japan responded to this by lowering interest rates but, by 1999, the policy rate had been reduced to zero. In 2001, the Bank of Japan switched from targeting an interest rate to an explicit target for banks’ reserve balances.