As I touched on at the beginning, both Sweden and Japan experienced financial bubbles. Nevertheless, the subsequent paths of the two countries were quite different (Chart 1). In Sweden after the crisis in the early 1990s, capital was quickly injected into the banking system and the stability of the financial system was restored.
In addition, the Swedish krona was floated, and the Riksbank was able to ease monetary policy. With the tailwind of the depreciating krona contributing, the Swedish economy began to recover as early as 1993.