However, as economic globalization has been progressing rapidly since the 1990s and emerging economies have become rivals, Japan’s economy has not been able to adapt sufficiently to such a changing environment and Japanese firms’ international competitiveness and productivity have declined. For two major reasons Japanese firms were  2  BIS central bankers’ speeches  unable to adapt to the changing environment.
First, the effects of the bursting of the bubble overlapped. Japanese firms were busy resolving “three excesses” of debt, employment, and business capacity that had piled up during the bubble period, and did not have leeway to pursue proactive economic activity. Second, economic structural reform was delayed, namely, labor and capital did not smoothly move from low-productivity areas to high-productivity areas.