Profile picture of Finance Nerd

Finance Nerd

@Finance_Nerd_

Published: February 11, 2025
178
2.9k
15.0k

Japan's economy is a mystery: • Debt at 250% of GDP. • Growth stuck near zero for decades. • Yet no economic collapse. Here’s how Japan broke every economic rule and still survived:

Image in tweet by Finance Nerd
Image in tweet by Finance Nerd

In the late 1980s, Japan was a financial superpower. The stock market was booming, real estate prices were astronomical, and wealth seemed limitless. But beneath the surface was a ticking time bomb. Banks handed out loans with reckless abandon, fueling an unsustainable bubble.

When the crash came in the early 1990s, it wiped out trillions in market value and put the nation into a prolonged economic slump known as “The Lost Decade.” Unlike other countries that bounce back after recessions, Japan got stuck.

Image in tweet by Finance Nerd

Growth slowed to a crawl. Businesses became cautious. Consumers saved instead of spent. But remarkably, despite all this, Japan never collapsed.

While Japan's debt is massive, almost all of it is owed domestically—to Japanese banks, pension funds, and households—not foreign lenders. This means Japan’s financial system isn’t at the mercy of external forces. Then there’s the Bank of Japan (BoJ).

Image in tweet by Finance Nerd

For years, it has kept interest rates at or below zero to encourage borrowing and spending. It also pumped vast amounts of money into the economy through a policy called "quantitative easing"—buying government bonds to inject cash into the system.

Image in tweet by Finance Nerd

Critics argue that this approach merely props up a fragile system. But Japan’s approach prevented mass unemployment, bank collapses, or hyperinflation—common signs of economic crisis elsewhere.

Image in tweet by Finance Nerd

However, Japan isn’t invincible. The population is shrinking and aging rapidly. Nearly 30% of its citizens are over 65. Fewer workers mean less economic output, lower tax revenue, and greater strain on social services like healthcare and pensions.

Japan's government continues to experiment with policies like: • Increasing immigration to counteract population decline. • Investing in automation and robotics to boost productivity. • Gradual fiscal consolidation to stabilize debt growth.

Image in tweet by Finance Nerd

Only time will tell what will happen. What do you think about Japan's economic paradox?

"The Digital Gold Rush Is Here." My threads generate 50M impressions every month. If you are looking for high-quality, personalized & viral threads like the one you're reading... DM me and let's work together 🤝

Image in tweet by Finance Nerd

Share this thread

Read on Twitter

View original thread

Navigate thread

1/12