Is the West Doomed to Repeat Japan’s Fatal Financial Mistakes?
Japan’s dazzling economy was second only to the U.S., with incredible technological leadership, industrial productivity, and an enormous trade surplus. Then it collapsed into three decades of stagnation. Symptoms of the disease that destroy

Japan’s dazzling economy was second only to the U.S., with incredible technological leadership, industrial productivity, and an enormous trade surplus. Then it collapsed into three decades of stagnation. Symptoms of the disease that destroyed its dominance – asset bubbles, central bank distortion, and ageing populations – are showing up in the U.S., U.K., and beyond. Are we doomed to repeat Japan’s fatal financial errors, or is there time to make the necessary corrections?
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A Quick Recap: What Happened in Japan?
- 1980s: Japan’s stock market (Nikkei 225) boomed, along with property prices, fuelled by speculative mania and low interest rates
- 1989: The Nikkei peaked at 39,000 points in December – a level not seen again until 34 years later – and the crash started
- 1991-2010s: Despite quantitative easing, ultra-low rates, and other fiscal stimuli, the “Lost Decade” became the “Lost Decades”, with Japan stuck in a cycle of deflation, decreasing wages, and weak overall growth
- 2024: In February – more than 34 years after the previous high – the Nikkei finally returned to 39,000 points, and it hasn’t grown since
So, What Went So Wrong?
A recipe for disaster that crippled the world’s second strongest economy. Some of which we can see re-appearing today in the West:
- Asset Bubble: Overvalued stocks and property thanks to deregulation and easy money
- Debt Overhand: Banks continued committing to risky loans that consumers and businesses couldn’t repay
- Policy Paralysis: A lack of structural reform, while depending on repeated short-term stimuli, stalled recovery
- Demographics: Japan’s birthrate plummeted in the 1990s, reducing domestic demand
Familiar Patterns: Yes, You’re Really Seeing the Same Symptoms
- Asset Inflation: U.S. equities have gained over 500%, fuelled by quantitative easing and record-low interest rates, while the U.K.’s property prices have outgrown wage increases by more than 5x
- Ageing Population: While slower than Japan, the population of the U.S. is still ageing significantly, while the over-65 demographic in the U.K. is set to double by 2050
- Low Productivity: Both countries have seen a continued decline in productivity growth since the early 2000s
- Central Bank Addiction: The Fed and Bank of England have been relying heavily on ultra-low rates and quantitative easing, just like the Bank of Japan did, creating distorted financial markets
Lessons Still Being Ignored
The West appears ignorant to the signs. Without addressing the growing concerns, we are doomed to see the same result that has plagued Japan for decades.
- You can’t stimulate forever: Japan tried. It led to zombified companies and weak innovation
- Demographics matter: Ageing reduces consumption and productivity. No amount of monetary policy fixes this
- Structural reform is hard but necessary: Japan delayed. The U.S. and U.K. appear to be doing the same
- Markets can stay broken for decades: It took Japan over 30 years to reclaim its stock market peak
What This All Means For You
There are real, tangible effects for the everyday working people of countries when bubbles burst like they did in 1990s Japan. Your future, and that for your family, could feel the after-shock for years to come.
- Your pension may be tied to inflated assets that don’t reflect real growth.
- Housing may remain unaffordable for a generation — then crash when demographics shift.
- Growth may slow, but inflation may stay — a painful combo for wages and savings.
- Policy leaders may be repeating history, not rewriting it.
The Social and Cultural Impacts of Long-Term Stagnation
It’s not just a country’s finances that suffer in these circumstances. Japan’s economic stagnation also reshaped its culture, and warns us of what we could expect should we continue down the same path:
- A disillusioned youth: A whole generation grew up in Japan with a no-growth economy, which led to further declining birth rates, falling consumption, and an abandonment of traditional lifestyles for many
- Workforce malaise: Lifetime employment coupled with wage stagnation led to widespread burnout, and later to rising cases of “karoshi” – death by overworking
- Risk aversion: Households and businesses became more conservative in their everyday approach, meaning innovation slowed down and consumer behaviour rooted itself to the safe options rather than the ambitious
Youth anxiety, delayed home ownership, a cultural mood shift, and stale or shrinking wages for most – it all sounds very familiar. Are we seeing this unfold in front of our eyes?
Final Thought
Japan’s crisis didn’t come with a bang. It was slow, quiet, corrosive, and poisonous from the inside. Looking back at how it unfolded, it seems it was inevitable. But when we see the same symptoms appear in our countries today, it feels like everybody believes that we can’t possibly face the same consequences.
The West looks to be on a similar path to 1990s Japan, plagued by all of the same problems that we saw before. Will we look back on this period in 30 years and say it was inevitable too?
Join the Conversation
Do you think we’re repeating Japan’s mistakes? Can governments break the cycle, or are we already too deep? Add your comments below.
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Categories: Did You Know?, World News
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