Name: Japan’s Comeback: Why the “Lost Decades” May Finally Be Ending
Uploaded: 2026-02-22T21:32:24.000Z
Duration: 12 min 11 s
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That's a Japanese term meaning falling behind.

In 1980s, Japanese industry was the envy of the world in a variety of sectors such as automotive, electronics and steel.

As a result, asset values went up, particularly here in Tokyo, where real estate values went sky high, supported by patient capital that did not demand a lot of returns.

The 1990s, though, saw that asset bubble burst.

And when the Japanese government and Japanese banks did not step in aggressively, they took what was a lost decade and turned it into a lost three decades.

Most people's expectation of Japan or business mindset of Japan is 30 years of stagnation.

I think, you know, the recall the lost ages during decades, and

we do not have a substantial growth in Japan.

Japan faced the deflation for very, very long time.

Japan has been suffering from deflation for more than two decades.

In the late 80s, Japan's economy grew by as much as 6.7% a year, only to have that growth plummet for most of the next 30 years, hovering between 0 and 2% and contracting during the great financial crisis and the COVID pandemic, relegating what had been the third largest economy in the world to number four.

As Germany surged past, the Nikkei stock market went 3:34 years without setting new highs.

Japanese government bond yields turned negative and stayed there for years.

But all that could now be changing as Japan emerges from those lost decades.

Mark Rowan is CEO of Apollo Global Management.

And holding on to your cash or leaving your money into JGBs for the past 30 years has been fine because there's been no inflation.

All of a sudden you have closer to 3% inflation, you have interest rates up for the first time, and

that savings is going to be deployed productively.

And now some of it has to go toward retirement.

They will want better solutions for retirement, but

some of it is just going to keep up with purchase price and purchasing power.

I think about what's happening in Japan and in Japan, they're going through generational change.

And it's generational change in corporate governance.

It's in interest rates, it's in government policy.

And in many ways they are the first of the Western democracies to face real aging retirement and high levels of government debt.

And what's happening here is totally different than people's expectation because most people's expectation of Japan or business mindset of Japan is 30 years of stagnation.

Today the thing that got things going again for Japan was ironically adversity.

As supply chains came under stress from the COVID shutdown.

And a war in Ukraine put pressure on energy prices, a big problem for a country dependent on oil from abroad.

With the supply chain breakdown, corporate has executes to transfer the price to the retail.

So now the the CPI started to suddenly, which has been 01 negative for a very long time, suddenly went up to almost 3%.

Agwaita is head of Asia Pacific for Apollo.

So with the deflational environment, cash has been the king.

But with the inflation at the close to 3%, cash is not the right assets to own.

So that has to put the pressure on a lot of people to think about things differently.

Even before the return of inflation, those responsible for Japanese markets were thinking differently, starting with Prime Minister Abe's call for market reform back in 2015.

And it's true that for maybe a good decade, Japan did struggle in finding its way out of that banking crisis.

Maria Solis is director of the center for Asia Policy Studies at the Brookings Institution and author of Japan's Quiet Leadership.

But the fact is that we have overused the image of the last decades because this has not been a period where Japan has stood still and people refer to this period as 30 years.

And a lot has happened in the economy in the politics and international projection of Japan that actually shows that under currents of change have repositioned where Japan stands today.

Some areas actually there was a lot of progress.

I think in the area of corporate governance, you do see important changes there.

I also believe that the notion of womenomics idea that Japan needed to create conditions for women not to have to choose between a career and a family raising a family.

So much so that Japan actually has a very high level of female labor participation.

As much as Prime Minister Abe may have laid the groundwork for reform, the state of the economy did not demand the changes he wanted for that.

It has changed the politics, it has changed the main economic challenges that the country faces.

And I think in many ways it has redirected areas where reforms, reform is necessary now inflation has returned and there's a new prime minister in town, one who's just won a landslide victory and seeks to take Abenomics reform to a new level.

So many significant changes are in the Japanese not only Japanese market, but also Japanese society.

Hiromi Yamaji is group CEO of the Japan Exchange Group which oversees the Tokyo and Osaka stock exchanges.

What was the role of government, the Japanese government in the reforms?

I think, you know, since the Prime Minister Abe supported our governance reform back in 2015, I think all the successors of Mr.

Abe, like Mr. Suga, Mr. Kishida, Mr. Ishiba and the current Ms.

Takaichi, all of them were quite big supporter of governance reform because all of them were convinced that growth of the private sector is essential for the growth of entire Japanese economy.

Since taking over the TSE in 2021, Yamagi has implemented a series of reforms to encourage Japanese companies to become more profitable and more accountable.

Your reforms of the markets has various aspects to it including price to book ratio and interlocking ownership of equity and independent directors.

I think to transform the mindset of the management of the companies.

That's very important and also probably the most challenging thing.

And PBR is just kind of a financial indicator to just gauge how much you progressed.

But I think a fundamental challenge is to transform the mindset of the management.

Not all minds are willing to be transformed.

Have you had some management changes in order to respond to the.

Well, I think, you know, at least once a year we've analyzed the current situation of the Japanese market or Japanese companies and we are not the entity to assess the progress.

The global investors is the, you know, the people who assess how much progress we've made.

The most recent one, we did a analysis of a current situation December last year Based upon the 400 global investors domestic and overseas.

If the markets are any judge, Yamagi's efforts are bearing fruit.

Last year was a record high more than we have 5,100 Mondays and the total amount was 35 trillion yen.

And that means that the buyer side seeking for say more growth or Asian needs for growth and the seller side is trying to reorganize their business portfolio of Tokyo Stock Exchange pushing the corporate to create more efficiency in capital usage for corporates and ROE has been very, very low.

And more than 50% of the company listed in Japan has been trading below the book value.

So they are pushing for all capital efficiency and they need to explain the reason why they trading below the book.

The Japanese push for higher returns in response to reflation comes against the backdrop of a long term challenge that's increasingly common in major economies around the world.

Need a rapidly Aging workforce population between age 14 to 65 hit the peak in 1990.

And since then, because society started aging, people spend less.

So always demand shrink faster than supply.

So the country faces long term deflation and low growth.

I think we're looking at things that are structural that are going to take place over the next five to 10 years.

The need for Japan to provide for its aging population and to deal with its aging population.

The need for Japan to finance what it needs to finance and the opportunity that Japan has.

Japan responded to the challenges of its aging workforce by adding workers from groups that had been on the sidelines.

Well, this is clearly one of the most serious challenges because the sheer drop in the level of a population, the absolute numbers, but

The other one is of course to bring in women into the workforce, to bring in the elderly, who in Japan tend to be still very active, and

to make sure that you can, as much as possible, maximize labor participation.

But there is a limit to how many women, elderly and foreign workers Japan can bring into the workforce.

What does reform of capital markets do to help that problem?

I think, you know, the corporate governance reform said that we would like to see more active female workers in the workforce and also more senior persons are working freely in Japan now.