Japan was on the rise. In the 70's and 80's they had the world's second-largest Gross National Product (GNP), and at one point had the highest GDP in the world!. And then, BOOM! It wasn't quite like America's Great Depression, but it was still quite nasty.
Japan had super-low interest rates that raised the stock market and real estate market. Public and private valuations tripled to an extraordinary rate. Three square meters near the Imperial Palace would run $600,000. Obviously, this was unstable. No doubt about that. The Finance Ministry thus raised interest rates to curb the speculation, but that led to a stock market crash and people failed to make payments. Thus many consolidations occurred and many found themselves begging for government bailouts.
And thus, Japan was stuck on the downhill for over 10 years. There was also the Asian Crisis that wasn't too related to that of Japan's but nonetheless had an impact. Japanese people started spending less and saving more, thus decreasing aggregate demand and causing even more stagflation.
So the main takeaways from this crisis are:
Act quickly: the government was slow to respond, which dropped confidence among investors
Don't spend: Japan tried to start numerous public works projects that didn't help a log
government spending is only a short-term AD shifter
Demographics: Japan didn't want to raise the retirement age or tax rates
Watch out for debt: Japan had too much debt
https://www.thebalance.com/japan-s-lost-decade-brief-history-and-lessons-1979056
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