Between January 1985 and January 1990, the NIKKEI, the Japanese

Essay

Between January 1985 and January 1990, the NIKKEI, the Japanese stock index, rose an astounding 217 percent. Tokyo housing prices had jumped to $93,000 per square foot. Then stock and housing prices plummeted. The NIKKEI finally bottomed out in April 2003 and had lost about 79 percent of its value from January 1990. Explain the macroeconomic effects of this so-called Lost Decade in Japan. During this period, Japan experienced a deflationary spiral; explain. If you were the chairman of the Bank of Japan, what prescription would you apply? If you were the government of Japan, what would you do? Compare this to the United States' Great Recession.