Beginning in mid-1996, the government introduced measures to deflate a swelling property bubble, including high property taxes, a restriction on early real estate sales to avoid speculation, and an increased housing supply. Japan is a unique case for several reasons. There is not space to discuss it here, but without recovery in Japan, it will be difficult for the rest of the region to truly recover. In one sense it could be easy to renew one's faith in Asian miracles when observing the rate of economic recovery in these economies over the past year. Factories are scrambling to keep up with soaring export orders and increasing domestic demand.
Stores are jammed and corporate earnings are surging.
Yet, while the worst of the crisis seems to be over, the risk of setbacks cannot be excluded. Some fundamental problems remain. The region is still suffering from the collapse in asset prices. While the smaller companies are recovering, the large conglomerates still have excess capacity. There is an escalation of corporate bankruptcies, and even the overall rate of growth has slowed down from its peak in mid-summer, 1999.