In order to understand why the recovery has been slow, it is useful to use a rather stereotype dichotomy of new versus old economies. In Japan, the new economy consists of electronics and some related industries. The old consists of most of the others. Since the middle of 1999, the new economy had been hit favorably by an acceleration of US economic growth and the worldwide IT boom. A virtuous cycle among exports, production, and business fixed investment started to develop and became a major driving force of the recovery in 1999-2000.
People call the period a lost decade.
But the economy has grown at a positive rate, if small-which may explain the lack of the sense of crisis on the part of the general public and may have been a cause of the slow pace of restructuring. The weakness of the old economy has been deeply connected with many structural problems plaguing the economy. The spending binges of the late 1980s along with other inefficiencies have left Japanese firms with very low rates of return on capital. Efforts to increase the return on capital have resulted in low growth of wages and consumption. The old economy has traditionally shown high correlation with consumption-one of the reasons for its stagnant behavior.