4. Ending：What history has told us？

 

After 30 years, the Japanese asset price bubble has already been a piece of history. However, economic development will never stop，and we can't predict whether there will be new bubble crisis in the future. So, what can we learn from the Japanese asset price bubble? What history has told us?

As far as I'm concerned, the first lesson we can learn is the dangers of speculative bubbles. The Japanese asset price bubble was fueled by excessive speculation in real estate and stocks, leading to a sharp increase in asset prices that was not supported by underlying economic fundamentals. When the bubble burst, it resulted in a severe recession, which lasted for over a decade. 

Japan real estate and stock market changes

The second thing is the importance of sound economic policies. The Japanese government's response to the asset price bubble was slow and inadequate, exacerbating the economic downturn. The lesson here is that sound economic policies, such as prudent fiscal and monetary policies, can help prevent or mitigate the effects of an asset price bubble.

Last but not least, The risks of deflation: The prolonged economic downturn in Japan after the bursting of the asset price bubble was accompanied by deflation, which is a decrease in the general price level of goods and services. Deflation can lead to a downward spiral of economic activity, as consumers and businesses delay spending in anticipation of lower prices, leading to further economic contraction.

Asset Price Deflation

Overall, the Japanese asset price bubble serves as a cautionary tale about the dangers of speculative bubbles, the importance of sound economic policies, and the risks of deflation.