Lost Decade is the nickname commonly given to Japan’s prolonged economic stagnation after its asset bubble burst.
Japan experienced a dramatic rise in land and stock prices during the late 1980s. The Bank of Japan tightened monetary policy, and asset prices began to fall around 1990. Banks were left with troubled loans, companies reduced investment, and households became more cautious.
The phrase originally referred mainly to the 1990s, but economists often use “Lost Decades” because weak growth, deflationary pressure, banking problems, and sluggish demand continued well into the 2000s and beyond. The period was not one uninterrupted collapse: Japan still had advanced industries and some years of growth.
The episode is frequently discussed in debates about deflation and monetary policy. It also became a warning about delaying bank cleanup and allowing falling prices and weak expectations to reinforce one another. Japan’s experience is distinct from the Great Depression and should not be treated as a single worldwide recession.