1. Introduction

In decades of globalization, the economic world has changed, and many questions arose that influenced many economies during that period, such as high inflation rates, economic recession, and politics. Many nations have achieved a certain level of success in responding to these pressures, but the levels of success have differed for different countries. The Japanese economy, long expected to become one of the largest economies in the world, has faced stagnation for nearly three decades, after which it is usually referred to as the lost decade. This period of stagnation in the Japanese economy started in the early 1990s and signified a sharp contrast to the country's economic miracle in the post-war period. In particular, the country's difficulties during the period have provoked skepticism to further perspectives of Japan as a leading economic state in a postindustrial globalized world [1].

The Lost Decades began with the burst of Japan's asset price bubble, which found its expression in deflation, high public debt, and a chain of economic failures. Like any other developed nation, Japan has also been a victim of demographic fortune through its aging population and relatively low working population, which has greatly limited its growth. Unfortunately, Japan already has a shrinking workforce population as the population gets older, putting the economy under pressure. Second, the sources of growth have also shifted away from what was once a dominant export-led growth model, which has decelerated in recent years mainly because of external shocks such as the Asian financial crisis in 1997 and the global economic crisis in 2008 [2].

On the other hand, Japan's contemporary internal structural problems, such as the inefficiency of banking and financial systems, have worsened its economy. Failing to respond quickly to global economic variables has been a setback in the country's recovery process. The onset of inflation merely moderated that movement, suggesting that the deflationary forces that characterized the 1990s extended well into the 2000s, leading to a long spell of slow growth. The Japanese government has struggled to balance its economy by employing stimulus packages and relaxed monetary policy. It has not restored the economy to the previous Japanese economic growth model [3].

This paper aims to identify the recent significant shocks in the Japanese economy, such as the Asian financial crisis in 1997 and the Global financial crisis in 2008. Besides, it will look at macroeconomic factors that characterize post-COVID Japan's development and give lessons other global economies should embrace from Japan. Thus, the paper offers a critical analysis of Japan regarding its crisis management abilities and crisis rebound. Its part in managing the international economy in the twenty-first is an essential element to realize how the other nations – the other global partners of Japan – may come to know these challenges more deeply so that they can prepare more suitably when they come upon the same problems themselves.

2. The Asian Financial Crisis and Its Impact on Japan’s Economy

The Asian financial crisis in 1997 affected most East and Southern Asia countries, including Japan. This crisis began in Thailand when the Thai baht collapsed. Hence, it extended the surrounding area and across the Asian region to demonstrate the vulnerability of financial structures and the interdependence of international markets. As for the USA, it had risky loans of approximately $600 billion, while Germany's banks were at risk of $340 billion. In Asia, especially Japan, the calamity laid bare weaknesses in the financial system after the bubble economy burst in the early 1990s [3]. Departments had offered extensive credit to many Asian countries, such as Thailand, Indonesia, and South Korea, some of the worst affected by the episode. When these countries failed to service their debts, Japanese banks were trapped with a massive portfolio of non-performing assets, worsening the banking crisis [2]

Similarly, the crisis forced the devaluation of many countries' currencies, especially in Asia. Thus, weak Japanese export venues; year by year, the currencies of Japan's neighbors started to decline while the yen was relatively more robust than other currencies, thus lowering export competitiveness [4]. This reduced export demand worsened the situation in Japan as this country relied so much on industries with export orientation. This may be due to a recent change of fortune, where the export destination purchased fewer Japanese goods than before and was stagnant.

Japan's domestic financial problems further exacerbated this. The country's banking sector, struggling since the asset price bubble burst in the early years of the decade, was struggling more as the crisis began. Japan's capital adequacy ranked low in many financial institutions, lacking enough capital to absorb the loss from bad loans extended to other Asian economies. This resulted in the domestic contraction of credit, more constriction of activity levels, and deflation [1]. The crisis was severe, but Japan implemented a gradualist policy for many years and a weak response. The authorities chose gradual approaches to stabilization, and instead of implementing radical change in banking systems, they acted selectively, trying to fix the problems gradually. Such non-deliberate, inconclusive actions affected the markets negatively and delayed the restoration process [2]. Instead of specifying the fundamental pathologies and addressing them in the financial system, the Japanese government resorted to quick fixes, failing to stabilize the country's economy.

The 1997 Southeast Asian financial crisis had a profound impact on Japan. It aggravated Japan's deflation trend and lengthened the time of loss of the twenty years the country was labeled the lost decades. Though the mechanisms aimed at banking reforms and stimulating the economy to start after the slump, the economic recovery was only noticeable at the start of 2000. However, the impacts of the lost decade were still felt. It exposed the structure's weakness to external factors. It stressed the call for superior financial principles and administration and slides that are in operation or anticipated to be in operation during Japan's economic policymaking.

3. The 2008 Global Financial Crisis and Its Impacts on Japan’s Economy

The 2008 Global Financial Crisis (GFC) originated in the United States because of the failure of the subprime mortgage market. This financial shock soon traveled worldwide, starting from emerging markets to developed nations, and crédit also affected Japan significantly because of their export-oriented economy. Core industries in Japan, like automobiles and electronics, experienced a paradigm shift in consumer demand and utilization primarily due to a breakdown in international markets— a terrible strike to the Japanese Economy [5]. Motor giants such as Toyota, Nissan, and Sony experienced low production and layoffs, which worsened the domestic recession and affected the world economy. This was the first time that Japan's GDP had fallen below its pre-1997 level, and worse, by 2009, it had shrunk by 5.5%, its worst since the aftermath of the Second World War [6].

The analysis shows that Japan relied heavily on global trade and faced considerable challenges after the 1990s banking crises. Even some of the most prominent international financial institutions – those of Japan, still struggling in the aftermaths of the asset bubble of the mid-1990s – were heavily affected by the crisis. Many were exposed to international operations, especially in America and Europe, which almost went sour during the Great Recession [7]. Consequently, business losses in Japanese banks boosted as their overseas belongings tumbled and their power to provide credit rating diminished. This available credit constriction deepened the liquidity crises and contracted the scale of economic activity.

The Japanese government had little option but to resort to a set of fiscal packages to help reduce the recession's impact. To boost economic activity, the government provided funds to the economy and reduced interest rates to historic lows [4]. Such measures included offering subventions to industries worst hit by the slump and supporting infrastructure development projects to create employment. However, these interventions did not facilitate large amounts of borrowing. They had only a limited impact because the fundamental problem of the Japanese economy remained: the rapidly aging population, which reduced the productive workforce and put pressure on growth [5].

Another important issue that restrained the rapid growth of the Japanese economy was the demographic crisis. Not only were people in Japan aging, but the birth rates were also low for quite some time, which meant a decreasing working population. Another demographic problem of the Organisation by 2009 was that the GFC impact was aggravated due to lower workforce employment since fewer workers meant less production and consumption.

Also, owing to the increasing number of older adults in Japan, there was a need for more social welfare services, which resulted in a stressful financial situation for the Japanese government. Japan is one of the most indebted countries in the world: by the end of 2009, the country had a non-financial public debt of more than 200 percent of its GDP [8]. Therefore, recovery from the GFC was always going to be fragile, and even until the middle of the 2010s, Japan's economic growth remained rather weak. Despite maintaining a mere economic growth rate, the country did not entirely experience a financial failure. The recovery has been gradual and has, like this, shown the need for radical amendment. Some critics blamed the inability of Japan's economic policies during this period to effectively solve the country's structural problems due to the lack of adequate measures. These strongholds refer to ineffective and inflexible financial markets, labor market stagnation, and over-reliance on exportation [9]. This shortfall was due to the slower economic revival in Japan, even through the most striking monetary measures applied by the Bank of Japan, including quantitative easing efforts.

4. Japan’s Economic Development in the Post-COVID Era

The COVID-19 outbreak has heavily influenced global economies and Japan, too. It should also be noted that earlier crises, including those of the 1997 Asian financial crisis and the 2008 GFC, provided outside shocks and affected Japan only through volume import and export channels that part of its demand and supply or intermediaries, with the pandemic inflicting double trouble blows, both domestically and internationally [10]. Japan's GDP contracted by 4.8% in 2020, for which it remains compared to the GFC of 2009 onwards [1].

The Japanese response aims to reduce the human cost of the pandemic, including restrictions on mobility and mass gatherings and the use of face shields during pandemic times. These measures, even though efficient in taming the virus, saw corporate operations and consumer demand fall drastically [9]. The government passed several stimulus packages to help bolster the business segment and people, as the Bank of Japan kept interest rates low to sustain the Economy [2].

However, the pandemic also shifted the pace of digitalization in different industries like healthcare, education, and e-commerce, which showed new opportunities for economic development. Therefore, Japan's adaptability to technological changes during this period has presented the country with a potential policy for rebounding after the pandemic [1]. However, long-term factors, mainly the increase in the aging population and the consequent reduction in the working population remain critical issues hindering Japan's long-term economic regeneration. The government's high debts hinder its recovery efforts and continue to provoke doubts about the sustainability of the Japanese economy in the long run [8].

5. Reflections and Lessons for Global Economies

Such experiences are informative for developing global economic systems and indicate possible scenarios for Japan and other countries in the next three decades. The Japanese experience, often termed the lost decade, refers to the period after Japan's asset price bubble burst in the early 1990s to show how hard it is to return to growth once an economy has stagnated for a long time. Relatively slower recovery in Japan due to its latest financial crisis coupled with the 1997 Asian financial crisis and the 2008 GFC requires urgent and efficient execution of solutions for managing financial crises [10].

There is a widely held account that weak financial system infrastructure was one of the major lessons from the Japanese crisis. The 1997 crisis revealed problems in Japanese banks, such as large non-performing loans and insufficient capital to support the losses [6]. A slow, gradualist approach to the crisis prevented the return to stability for longer and protracted the recession process [11]. Also, the GFC shook the confidence in the export-led growth model, especially when world demand slows down during a credit crunch [5].

The situation in Japan during the COVID-19 crisis also suggests other considerations about how to build economic digital adaptability and innovation. Despite negative effects, the pandemic unlocked more opportunities for growth using technologies. However, Japan's future problems have not disappeared—it has a continuously aging population and actively growing public debt. Crisis challenges remind other economies to implement structural reforms and invest in more productive technologies [8].

6. Conclusion

Over the last couple of decades, the Japanese economy faced several hard tests, going from the explosion of the asset price bubble in the early nineties to the Asian crisis in 1997, the GFC in 2008, and the current pandemic. All these events negatively impacted the Japanese economy, including instability in the financial system, over-reliance on export income, and demographic issues. Despite its resilience, Japan has often had a slow and uneven recovery, and structural problems such as demography - an aging population, a shrinking working-age population, and high public debt – remain unabated.

It was realized after the post-war period, especially in implementing Japan's economic and financial pragmatic strategies, that an efficient and flexible financial system is the fundamental component of any developed country's economic and capital formation plan. This slow recovery following the burst of the assets bubble and the 1997 crisis exposed the vulnerability of having a weak banking system and the implications of delayed reforms. Likewise, the Japanese response to the 2008 GFC showed the need for proper and big economic reactions, yet the country's continuous use of small stimulus packages hindered its recovery. The COVID-19 pandemic only underlined the need for more product diversification and transition to new forms and technologies. Japan has experienced a leap toward digitalization, where new development opportunities have appeared.

Given the new challenges that the global economy is experiencing in the 21st century, including advancement in technology, global warming, and changes in demography, the experience of Japan can be useful. The country's experience shows that only proactive, innovative, digital, and structural changes must be a priority for the leadership and governments. Furthermore, the Japanese example proves that while crisis resilience entails the provision of urgent financial fundamentals, it is equally important to use sustainable managerial activities to overcome fundamental economic failures. Other nations can benefit from understanding the achievements of the Japanese model and its weaknesses, avoid mistakes, and achieve greater results to create long-term, vibrant economies.