Abstract
This article compares Japan's experience during the 1980s with U.S. prosperity in the 1990s, trying to discern the extent of similarities and differences. It then provides an overview of how Japanese policymakers responded once economic conditions began to deteriorate. Japanese policy has been harshly criticized by U.S. economists; so Japan's mistakes may provide lessons for policymakers here and elsewhere. The article does not attempt to break new ground in this regard; so those familiar with Japan's circumstances will find little that is new, although possibly some differences of interpretation. On balance, the conclusion is reassuring. Although similarities exist between Japan's economic performance in the 1980s and U.S. experience in the late 1990s, land values, as well as stock prices, rose very rapidly in Japan. Bank lending backed by land also rose very rapidly. This is a critical difference, as the subsequent decline in Japanese land values crippled the Japanese banking system and economic activity generally.