December 2009

Summary: Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan's growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan's experiences suggest four broad lessons.

First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook.

Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery.

Third, well-calibrated macroeconomic stimulus can facilitate this adjustment, but carries increasing costs.

And fourth, while judging the best time to exit from policy support is difficult, clear medium-term plans may help.

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Author/Editor: Syed, Murtaza H. ; Kang, Kenneth ; Tokuoka, Kiichi.

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

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