LOCATING THE PROBLEM

JAPAN'S ECONOMY, WHICH became the object of international attention and admiration after the two oil crises of the 1970s, experienced a bubble, epitomized by stock and real estate speculation, during the latter half of the 1980s. It then experienced the collapse of that bubble in 1990–91. During the 1990s, the Japanese economy faced an extended period of stagnation, evidenced by low growth rates and rising unemployment rates (although there were, of course, alternating up and down phases). For Japanese firms, too, the 1990s were a difficult decade. The decade saw the deteriorating performance of many firms, and failures affected not only small and mediumsized firms but large firms as well. In the retail sector, supermarket chain operator Yaohan and the Sogo department store chain failed, while in the financial sector, Hokkaido Takushoku Bank, Yamaichi Securities, and the Long Term Credit Bank of Japan went under one after another. In the industrial sector, or, more pointedly, the core automobile sector, in which Japanese firms had become leading global players, Nissan fell into business difficulties, consequently looking to France's Renault for rescue and becoming affiliated with the French carmaker. Recently, Mitsubishi Motors has also fallen on hard times and requested German-American DaimlerChrysler to bail it out.

Japanese firms, which had swept the world with their direct investment offensive during the 1980s, faced a severe situation and often failure in their overseas projects during the 1990s, pulling out one by one. The Japan that had risen so rapidly as an investment and creditor superpower during the 1980s soon hit a massive wall in the 1990s. There was a feeling that Japan might experience in only one generation a rise to the status of investment and creditor power and subsequent fall, a history that in Great Britain had taken more than one hundred years to unfold.

In the past generation, we have observed the following changes in the Japanese economy and enterprises:

• (1) rapid success in the ten years following the first oil crisis,

• (2) a bubble economy in the latter half of the 1980s, and

• (3) a decade-long stagnation in the 1990s.