While many speak of a lost decade, or even lost decades, there is really little that warrant such a description. In fact, one can make quite a convincing case for arguing that what Japan went through is nothing less than a sort of miracle. It suffered a 'Great Depression' type shock, without suffering anything even remotely resembling a Great Depression. In fact, it hardly suffered a recession at all.
There can be little doubt that the scale of the asset price crash and resulting wealth destruction [in Japan] was as big as that plaguing the Western world from 1929 onwards.
However, [the graph above shows] what happened. [...] This is simply one of the most amazing graphs in economic history -- ever.
If you consider the economic shock that Japan endured, and the way banks were crippled by bad debts and their centrality in financing business, it really is stunning that Japan never really experienced anything like the Great Depression. Add in a shrinking and rapidly aging population and the mystery becomes even bigger.
Let that sink in for a moment. While the evidence is undeniable that Japan suffered a Great Depression-type shock (or even worse), it didn't experience anything even remotely close to a Great Depression at all.
In fact, in terms like unemployment and GDP per person (arguably the most important economic statistics of a country), it was even able to perform better than it's major rivals suffering no such shock, at least not until 2008, whilst the Japanese shock occurred in 1990.
The pleasant lesson from this is that apparently, it is possible to experience a great financial shock, on a par or worse as that of the 1930s, without suffering anything close to a Great Depression.
Next, let's take a look at the government debt as a percentage of GDP...