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Whither Japan's Corporate Governance?

Mar 2006
Working Paper
05-014
By  Masahiko Aoki
In retrospect, the early 1990s can be regarded as a threshold in the post-war history of Japan’s political economy. In the political domain, the half-century-long, one-party rule of the Liberal Democratic Party (LDP) came to an end in 1993. By then it also became clear that the bubble in financial and real-estate markets had burst. These two events ushered in a period of unprecedented uncertainties, as well as various trials and errors in the polity and the economy in response to them. Economy-wise, this period is conventionally characterized as a prolonged deflationary phase1 and many have blamed the faults of the macro-economic policy for the malaise. It became the fashion among the media, and even in academia, to dub the period a “lost decade,” referring to the losses of wealth, growth potential, secure permanent- employment jobs and even social morale. Challenging this popular view, I have been maintaining for a few years by now that the past decade may be more properly characterized as a decade of flux, meaning an unfinished period of institutional change.