It is now clear that the culprit in Japan’s economic stagnation over the past three decades is zombies. Japan’s government accumulated massive debt attempting to jumpstart its economy, and the Bank of Japan supported that effort with unconventional monetary policies, including the purchase of public and private bonds and securities, and financial repression to push inflation-adjusted interest rates below zero.
The macroeconomic policies designed to promote private investment created generations of zombie enterprises. Zombie firms are inefficient and unprofitable enterprises that rely on direct transfers and subsidized loans to avoid bankruptcy.
Weak banks with nonperforming loans find it cheaper to
Continue reading on RedState