Economic Bubble

Economic troubles also arose in the late 1980's, as Japanese manufacturers began finding it difficult to sell their products abroad. Japan's strong currency, high real estate values, and high labor costs all made Japanese goods expensive to overseas customers. Japanese manufacturers also had to compete with low-cost businesses from newly developing nations.

At the same time, the Japanese banking system began to suffer because the banks had made many loans during the late 1980's that failed as real estate prices dropped in the 1990's. The result of Japan's problems in trade and finance was a recession, a period when the economy virtually stopped growing. In the 1990's, Japan's unemployment rate rose, average household incomes nearly stopped growing, and consumer spending declined. However, other nations also suffered economic problems, so Japan's relative economic position in the world did not change dramatically. But economic anxiety spread throughout Japan as businesses and workers tried to maintain their competitive edge.