The Bubble Economy and the Lost Decade

The Bubble Economy and the Lost Decade

Background Information.

Although Japan’s economic recovery from World War II has often been characterized as an unparalleled success story, even a “miracle,” Japan’s course since the mid-1980s has been more of a roller-coaster ride, with both thrilling ascents and sobering falls. In the late 1980s, the Japanese economy boomed, driven by exuberance in the equities markets and skyrocketing real estate prices. Japanese consumers enjoyed unprecedented affluence; Japan boasted some of the world’s largest banks and corporations; skyscrapers sprouted around Tokyo; and Japan’s financial titans, flush with capital, went on a buying spree abroad, adding properties like Rockefeller Center and Pebble Beach Golf Course to their portfolios. Japan seemed headed for global economic dominance and some boosters (like the conservative politician Ishihara Shintarō and Sony founder Morita Akio in their 1989 bestseller The Japan That Can Say No) used this opportunity to celebrate Japanese culture, advocate an independent foreign policy, and stoke reawakening nationalist sentiments. Some Japanese worried about the social costs of seemingly limitless prosperity, especially the effects of affluence on youth and the increasing polarization of incomes in Japan’s famed “middle-class” society, but most simply rode the wave of rising wealth and global influence.

As  became apparent in retrospect, the Japanese boom of the 1980s was not built on firm economic foundations but was fueled by stock market and real estate speculation, reckless lending practices in the financial industry, and irresponsible government policies. What is now known as the Bubble Economy imploded in the early 1990s, leaving in its wake insolvent banks, discredited bureaucrats, pessimistic consumers, and a host of economic problems that would prove profound and tenacious. When the bubble burst, land values plummeted, the stock indices tumbled, and economic growth ground essentially to a halt. Over what has come to be called the Lost Decade, the economy was moribund as corporations refused to invest, consumers refused to spend, and all of the standard economic remedies (relaxed monetary policies and generous government spending) failed to spark a recovery. Meanwhile, the political landscape was upset by the collapse of the Liberal Democratic Party, which splintered and lost hold of the prime ministership in 1993, for the first time since the party’s founding in 1955. Japanese society also seemed to be in disarray, as divorce and delinquency rates spiked, suicides increased, and a series of crises—the Aum Shinrikyō sarin gas attacks on the Tokyo subway, the Great Hanshin Earthquake that devastated Kobe—revealed the weaknesses of the Japanese social fabric.

Although, with the new millennium, the Japanese economy began to show signs of revival, the LDP was able to regain its familiar political dominance, and social problems became facts of life rather than shocking revelations, the Japanese reluctantly came to recognize that the good old days of the high-growth era and the Bubble Economy were history. The broad social consensus that characterized postwar Japan, stressing economic growth as the prime national goal and personal advancement as the prime individual one, has fractured, leaving many to wonder and debate what defines Japanese identity in a new century and a new economic, political, and social context. At the same time, Japan is struggling to find solutions for many pressing issues, most of which (immigration, an aging society, environmental concerns) are shared by other liberal democracies around the globe.

Learning Goals.

1. Students will understand the origins and implications of Japan’s Bubble Economy in the late 1980s.

2. Students will understand the economic, political, social, and cultural impact of the Lost Decade of the 1990s.

3. Students will explore the ways in which Japanese debated questions of national identity and addressed the dilemmas of a post-industrial society at the end of the twentieth century.


Common Core Standards
College and Career Readiness Anchor Standards for Reading

  • Standard 1.  Read closely to determine what the text says explicitly and to make logical inferences from it; cite specific textual evidence when writing or speaking to support conclusions drawn from the text.
  • Standard 9.  Analyze how two or more texts address similar themes or topics in order to build knowledge or to compare the approaches the authors take. 
  • Standard 11.    Respond to literature by employing knowledge of literary language, textual features, and forms to read and comprehend, reflect upon, and interpret literary texts from a variety of genres and a wide spectrum of American and world cultures.

College and Career Readiness Anchor Standards for Writing

  • Standard 11.   Develop personal, cultural, textual, and thematic connections within and across genres as they respond to texts through written, digital, and oral presentations, employing a variety of media and genres.

College and Career Readiness Anchor Standards for Speaking and Listening 

  • Standard 3.  Evaluate a speaker’s point of view, reasoning, and use of evidence and rhetoric.

McRel Standards
Language Arts

McRel Standard 4. Gathers and uses information for research purposes.

McRel Standard 5. Uses the general skills and strategies of the reading process.


McRel Standard 6. Uses reading skills and strategies to understand and interpret a variety of literary texts


World History

McRel Standard 45. Understands major global trends since World War II

Key Concept.

Japan's impressive growth during the Bubble Economy of the 1980s  and subsequent challenges of the Lost Decade of the 1990s caused the Japanese to debate questions of national identity and their role in the global economy.

Essential Question.

Primary Source.

Thought Questions.

1. What impact did Japan’s wealth and international profile during the Bubble Economy years have on Japanese society and on popular notions of national identity? What changes did the Lost Decade bring?

2. Some commentators have contended that the 1990s were actually a time of social maturation and development for Japan, rather than simply a time of crisis and despair (as the term Lost Decade suggests). What do you think? What constructive changes might have occurred during this fluid time?

3. Were the excesses of the Bubble Economy years or the challenges encountered during the Lost Decade distinctively Japanese in some way?
4. From the 1970s through the Bubble Economy, the case of Japan (with its economic success and social stability) was held up as a model for the modernization of developing nations and the regeneration of mature Western societies (like the United States). In the wake of the Lost Decade, do you think that Americans, Europeans, and other Asians still have valuable lessons to learn from the Japanese experience?



Focus Activity Ideas.

In small groups, have students write down and then compare the first words that come to mind when thinking about the Japanese economy.  The class will focus on the changes in the economy and how those changes (and their perception) affected Japanese ideas of national identity and purpose.

Main Lesson Activity Ideas.

1. Compare the passages from Ishihara Shintaro’s The Japan That Can Say No with Mortimer Zuckerman’s “Land of the Sinking Sun.” Ishihara’s book was written in the heyday of the Bubble Economy, Zuckerman’s piece at the end of the Lost Decade. What do these two pieces reveal about mutual impressions of the United States and Japan? How do these authors each evaluate the heritage of Japanese culture and the significance of Japanese history? What do these perspectives tell you about Japan’s trajectory, economically, politically, and socially, from the late 1980s into the early twenty-first century? Ishihara is a noted novelist, controversial conservative politician, and governor of Tokyo; Zuckerman is the editor of U.S. News & World Report and an outspoken advocate of American free-market capitalism.  (For a more recent synopsis of Ishitaro's ideas about Japan's role in the world and the US-Japan relationship, please see a summary of a 2007 presentation at Japan Society by Ishihara about the US-Japan relationship.

2. Watch and discuss clips from a film by Itami Jūzō, the renegade director and master satirist of Japan’s Bubble Economy society. A Taxing Woman’s Return is a particularly barbed critique of the corruption and excesses of the late 1980s, with a very cynical take on the real estate business, politicians, Japanese gangs (the yakuza), and “new religions” (termed cults by some). What picture do Itami’s films present of Japan at the peak of its modern affluence and international influence? 

3. Read (or listen to) and discuss selections from Ōe Kenzaburō’s influential Nobel Prize lecture, “Japan, the Ambiguous, and Myself.” Ōe’s contemplative piece deals with Japan’s
national crisis of identity in the 1990s, long after the social consensus of the high-growth era had passed and in the wake of the reckless exuberance of the Bubble Economy years. Amidst the social, economic, and political crises of the Lost Decade, many commentators wondered if Japan would ever again be united by a shared sense of national purpose or strong feelings of common identity. Ōe’s perspectives are distinctive and thought-provoking. What does Ōe mean when he describes Japan’s “ambiguity” as a “chronic disease”? How has this driven Japan “into isolation from other Asian countries”? What is Ōe’s recommended cure for this “disease”?

4. Read and discuss Tanikawa Shuntarō’s short poem “A Push of a Button.” What concerns about contemporary Japanese society does the poet express here? Are these concerns, revolving around alienation and the ultimate impotence of individuals in a complex world, somehow unique to Japan?  (See source 4 below for bibliographic information to help find this poem.)

Summative Activity Ideas.

Have students list three consequences--social, economic, or international--of Japan's Bubble Economy and the Lost Decade.


1.  Ishihara Shintaro, The Japan That Can Say No: Why Japan Will Be First Among Equals (New York: Simon and Schuster, 1991), pp. 61-62, 105-109; Mortimer Zuckerman, “Land of the Sinking Sun,” Jewish World Review (March 7, 2002), available online at 

2. Clips from films directed by Itami Jūzō: Tampopo (1985) or A Taxing Woman’s Return (1988). 

3.  Ōe Kenzaburō, “Japan, the Ambiguous, and Myself” (selections, 1994). Anthologized in Wm. Theodore deBary, Carol Gluck, and Arthur E. Tiedemann, eds., Sources of Japanese Tradition, Volume II 1600-2000, 2nd ed. (New York: Columbia University Press, 2005), pp. 1183-1187.

4. Poem: Tanikawa Shuntarō, “A Push of a Button” (1996). Anthologized in James Huffman, Modern Japan: A History in Documents (New York: Oxford University Press, 2004); original source Tanikawa Shuntarō, Map of Days (Honolulu: Katydid Books, University of Hawaii Press, 1996), p. 103.