Chapter 4: The Burst of Bubble and Political Economy of the 1990s Depression

The Japanese economy changed its features in the 1990’s, compared with the 1980’s. It shifted down to an extremely lowered growth trend. Its continuous depression with economic difficulties has gathered international concern among the advanced countries. Among the major causes for such difficulties were clearly the swell of huge bubbles in speculative trading of shares and real estate in the late 1980’s and the in subsequent collapse. They brought an enormous amount of bad loans to the Japanese financial in-stitutions generating credit crunch, deteriorated assets of firms and households, caused continuous business failures, and a vicious circle of asset deflation. We saw the swell of bubbles by mobilizing the expansive flexibility of the credit system and the resultant destructive burst of them not seldom in the history of capi-talist economies. There were for example, the burst of bubbles in the tulip crisis of 1637 in Netherlands and the South Sea bubbles incident in 1720 in the UK already in the nascent period of capitalism, the cyclical crises in the 19th century, or the great crisis beginning from 1929. In the capitalist world economy since the late 1980’s, the possibility in capitalist economy to cause speculative bubbles and their burst strongl