WONG: Takeo says young people carried the scarring effects of the economic stupor for years afterward. The young people didn't get jobs and were not hired into good jobs. HOSHI: That was probably the biggest cause of Japanese stagnation. MA: Japanese companies didn't want to fire workers, so what they did was cut down on new hires. They signal an economy that had stopped growing. But the flat or falling prices were part of a bigger, gloomier picture. People had savings, and living standards remain high. Now, Takeo says that overall, deflation was not a disaster. MA: And, of course, the bubble eventually burst, and what followed in the 1990s was a sort of economic malaise marked with slow growth and also falling prices. HOSHI: There were lots of anecdotes that suggest the land prices in Japan may be too high. This is the problem that plagued Japan during the '90s, and why that period is known as the country's lost decade.ĪDRIAN MA, BYLINE: It began in the late '80s with a real estate bubble.
WONG: And it's really not much of a recovery at all. And if the economy doesn't recover even then, in several years, we start talking about L-shaped recovery. If it continues longer, we start talking about U-shaped recovery. TAKEO HOSHI: If the recession doesn't continue, we know it's a V-shaped recovery. Takeo Hoshi is a professor of economics at the University of Tokyo. By looking at these basic shapes, you can see both the decline and the upturn. Economists use letter names as a kind of shorthand to describe the shape that results from a graph of a country's gross domestic product over time. WAILIN WONG, BYLINE: To understand why an L-shaped recession is so undesirable, we have to look at the different types of recessions. Wailin Wong and Adrian Ma, of NPR's podcast The Indicator From Planet Money, introduce us to the L-shaped recession by looking at a country that went through one - Japan.
To the ongoing debate now over whether a recession is coming and what type of recession should we be worrying about.