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Financial Instability in Japan: Debt, Confidence, and Financial Structure

Return of Marxian Macro-Dynamics in East Asia

ISBN: 978-1-78714-478-1, eISBN: 978-1-78714-477-4

ISSN: 0161-7230

Publication date: 8 August 2017


The Japanese economy experienced prosperity during the bubble economy and has suffered from a prolonged recession since the bubble economy collapsed. This paper examines how the interest-bearing debt burden, structural change, and instability of confidence affect dynamic systems. Moreover, it examines these factors in the Japanese economy by applying a recursive vector autoregression analysis. This paper emphasizes the interest-bearing debt burden, the economic structure resulting from the instability of confidence, and the instability of confidence resulting from debt burden play important roles in the instability of the economy. As a result, Japan’s economy was determined to be relatively stable from 1980 to 1996, but was unstable, thereafter.




The authors are grateful to anonymous referees, Professor Yasuhiro Sakai (Shiga University/University of Tsukuba) and Professor Masao Ishikura (Hitotsubashi University) for their many valuable comments. This paper has been financially supported by the Grant-in-Aid for Scientific Research (16K03633) (23530325) from the Japan Society for the Promotion of Science and the academic support fund from the Department of Economics, Shiga University. Any errors remaining in this paper are the authors’ sole responsibility.


Ninomiya, K. and Tokuda, M. (2017), "Financial Instability in Japan: Debt, Confidence, and Financial Structure", Return of Marxian Macro-Dynamics in East Asia (Research in Political Economy, Vol. 32), Emerald Publishing Limited, Bingley, pp. 39-61.



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