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Underlying Structural Problems
Beyond the immediate aftermath of the bubble, long-term structural issues contributed to Japan's slow recovery.
Beyond the immediate aftermath of the bubble, long-term structural issues contributed to Japan's slow recovery.
- Demographics: Japan's rapidly aging and shrinking population led to a decline in the labor force and a rise in social security costs. This dampened domestic consumption and limited long-term growth potential.
- Corporate Culture: The traditional Japanese corporate model, characterized by lifetime employment and a focus on size over profitability, made companies slow to adapt and restructure. Many over-leveraged "zombie firms" were kept alive by "zombie banks," hindering the creative destruction necessary for economic rejuvenation.
- Lack of Productivity Growth: Despite being a technological leader, Japan saw sluggish productivity growth in its non-export-oriented, domestic sectors due to a lack of deregulation and competition.
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