Introduction:

In their contribution "Asset price bubble, financial crisis and deflation in Japan", Hansjörg Herr and Milka Kazandziska show that Japan serves as an interesting example for asset price bubbles and their consequences. After a period of high GDP growth which began in the 1950s, Japan fell into a deep financial crisis when the real estate and stock market bubble burst in the early 1990s. The bubble and its burst led to a crack in the Japanese development process, and to this day Japan has still not been able to regain the prosperity it had before the bubble. The Japanese bubble has similarities with the subprime crisis, which started in 2007 in the U.S., and heavily affected the world financial system and the world economy. The key question is whether the United States, Europe and other countries will have similar problems overcoming an extended period of potentially low growth or stagnation after the recession is over. The analysis of the development in Japan can help to better understand the dangers that result from bubbles and asset price deflations, and to determine what kind of policies are needed to prevent a 'Japanese' development after the subprime crisis.