Page 12 - Accelerating out of the Great Recession

INTR ODUCTION

In the Aftermath

of the Great Recession

It was not at all what the experts predicted. Most of them did
not foresee that an economic powerhouse could suffer so much
damage in such a short period of time. They did not expect the
fast-growing gross domestic product (GDP) to go so spectacu-
larly into reverse, the real estate bubble to burst as violently as
it did, and industrial production and capacity utilization to fall
so steeply. Nor did they expect the stock market to plunge so
dramatically from its all-time high—although it would recover
some ground subsequently.
No, the Japanese (and Western) economists and analysts of
1991 predicted none of these developments. They expected that
the 4 percent compound annual growth rate in real GDP that
Japan had enjoyed for a decade would continue unabated. They
expected that incomes, property values, industrial production,
profits, and share prices would continue to rise.
But, as we know, Japan entered what is today called the Lost
Decade. Between 1991 and 2001, its compound annual growth
barely crept above 1 percent. The Japanese government dithered

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