Reflecting on 1990's: Japan's Lost Decade

December 13, 2000

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Executive Summary

Japan enters the twenty-first century still languishing in the "lost decade" of the 1990's. Much of its elite knows that the country still has to confront its economic problems, its lack of political dynamism and the inadequacy of its communication infrastructure and skills. The era of one-dimensional Japanese power - projected through economic diplomacy and managerial verve - is long over. Confidence has been jolted by chronic economic stagnation: between 1992-99, annual real growth averaged a mere 1%. Many Japanese aspire to a social economic transformation that keeps pace with globalization, yet find these aspirations frustrated by a paradoxical combination of political instability and immobility. These diminishing expectations and Japan's preoccupation with domestic problems have greatly constrained its diplomatic maneuverability. The changing world order has eroded Japan's confidence in its traditional foreign policy habits: reliance in US-Japan alliance, economics led regional diplomacy and the G-7 tri-lateralist order.

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