The Formation and Prevention of Asset Price Bubbles: A Case Study of Japan’s Asset Price Boom and the Lost Decade
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https://doi.org/10.65826/CenRaPS.8.1.1.174Keywords:
Asset Price Bubbles, Japan’s Lost Decade, Economic DevelopmentAbstract
Asset bubbles are economic phenomena typically characterized by significant fluctuations in asset prices that lack rational foundations relative to their intrinsic values. The substantial rise and subsequent decline in the Japanese economy's real estate and stock markets from 1986 to 1991 serve as a notable case study. This study aims to analyze the mechanisms of emergence and fundamental characteristics of asset price bubbles, investigate the potential for their prevention, and examine the extensive economic consequences they entail. The primary thesis of the article is that predicting, and consequently preventing, asset price bubbles is a formidable task. We address Japan's asset price boom and subsequent crash, which spanned over a decade, as a detailed case study to substantiate this claim. The central research question of the study is, what are the formation mechanisms of asset price bubbles, and what profound consequences do they bring about? To answer this question, a wide range of primary and secondary sources, including editorials, academic articles, books, and reports from international financial institutions, has been utilized. Data were examined using a case study methodology through a qualitative and analytical approach. The analyses and case review demonstrate how challenging it is to definitively identify asset price bubbles at an early stage. Furthermore, the study emphasizes the severe impact of these bubbles on economic development and stability, drawing upon the Japanese example and referring to other nations globally.
Keywords: Asset Price Bubbles, Japan’s Lost Decade, Economic Development.
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