Japan’s tough economic development of the 1980s ended at the start of the 1990s. At the end of 1980s, irregularities inside the Japanese economic organization had qualified a hypothetical asset price bubble of massive scale by Japanese enterprises, banks and securities corporations. The mixture of extremely high land prices and low interest rates temporarily caused sharp liquidity of the market. This led to enormous borrowing and strong investment mainly in domestic and global stocks and securities. Realizing that this bubble was unsupportable, the Finance Ministry of JAPAN precisely increased interest rates in late 1980’s. This severe course of action metaphorically bursted the bubble, and the JSE (Japan stock exchange) market collided. A debt crisis trailed and the Japanese banks and insurances were now burdened with uncollectable bills, uncollectable loans and had to write off many debts as bad debts. The financial associations were bailed out from the government, credits from the reserve bank or known as central bank and the ability to delay the acknowledgement of losses, eventually turning them into the banks whose net worth is less than or so called Zombie banks. Zombie banks are considered to be one of the important causes for the Japan economic stagnation. Michael Schuman ( Asia business correspondent for Time Magazine ) said that Japan's economy would not have started to improve until this practice had terminated, he also indicated that these banks kept inserting more capitals into loss-making “ Zombie firms “ to keep them floating, arguing that they were too huge to fail. Banks kept insolvent firms alive by continuing to deliver them with credits, often at below-market interest rates. These so-called “zombie” firms regularly suffered from low productivity and lagging technology, but were kept moving because the banks were loath to show loan defaults on their balance sheets. Most of these technically insolvent firms were protected from foreign competition and many were small. And they were often better at lobbying local politicians for forbearance than producing what consumers wanted at competitive cost. Most of these enterprises were too much in debt to do much more than stay alive on bail-out funds. Finally, most of these weakening companies became unsupportable, and merging of companies started to take place, turning the four important national banks in Japan. Several Japanese businesses were loaded with huge debts, and it turn out to be very difficult to take loans or credit from the bank. Therefore during the time from 1990 till 2010 was known as "lost decade", this was when the economy slowed down or grew at a miserable rate. Unemployment rates were on the rise, but not at a threatening level. Many Japanese firms substituted a large part of their labour force with temporary workers, who had little or no job security and very few aids. Japan’s economy has not been fully recovered yet and is still making efforts to overcome from this situation.

The “Lost decade” was there for more than 20 years and Japan was trying hard to get back on track. To end the era, it used aggressive monetary easing to depreciate the value of their currency Yen in the global market. The Bank of Japan had retained short-term interest rates somewhere around zero ever since 1999. With quantitative easing, commercial banks were flooded with surplus liquidity to promote private loaning, giving them large stocks of excess capitals, and hence little risk of shortage of liquidity. The BOJ achieved this by purchasing many government bonds than would be essential to fix the interest rate to zero. The Bank of Japan allowed the commercial bank current account balance to increase from ¥5 trillion yen to ¥35 trillion for a 4-year period beginning in March 2001.Bank Of Japan made three times the amount of long-term Japan government bonds it could purchase on a monthly basis. In 2010, the BOJ declared that it would scrutinize the purchase of ¥5 trillion in assets. This was an effort to bring down the value of yen against the U.S. dollar to motivate the local economy by making their exports cheaper.
"While supporting a rise in exports, a further impact of a weaker currency was to raise the price of imported raw materials. Latest data showed that average input costs rose for the fourth month in succession, and at the sharpest rate in over a year- and-a-half. Margins subsequently remained under pressure as a net fall in output charges was recorded for the twenty-first month in a row."
(A statement in the latest Japan manufacturing PMI report )
(http://www.markiteconomics.com/Survey/PressRelease.mvc/135f604ae2ab42cfbaaf1f518dd225eb ) It did not achieve the results which were expected but still had positive figures. Monetary easing was not the only method used to improve the economy but strategies like expansionary fiscal policies and a wide range programme of structural reforms. Expansionary fiscal policies Is when there is a rise in government buying, a fall in taxes, and a growth in transfer expenditures are used to undo or erase the difficulties of a business-cycle contraction. The main motive of introducing expansionary fiscal policy is to reduce a recessionary gap, motivate the economy, and lower the unemployment and its rate. Expansionary fiscal policy is frequently agreed by expansionary monetary policy. It affects aggregate demand, the distribution of wealth among the people, and the economy’s capability to manufacture goods and services. In the short run, changes in expenditure or taxing can change both the level and the pattern of demand for goods and services. With time, this aggregate demand influences the allocation of resources and the productive capability of an economy through its influence on the returns to elements of manufacturing, the development of human capital, the distribution of capital expenditure, and investment in technological inventions. Tax rates, through their effects on the net returns to labour, saving, and investment, also has a great impact on both the magnitude and the allocation of productive capacity.

All the recent economic policies developed by Japan are called Abenomics. Abenomics involves 3 specific policies to bring inflation in Japan, and is trying to pull themselves up from deflation from the past 20 years. These policies are developed mainly by the current prime minister of Japan “Shinzō Abe”. It includes an enormous rise in fiscal stimulus through government expenditure, a massive rise in monetary motivation through unconventional central bank policy, and a reform package directed at making structural improvements to the Japanese economy. In short, "Abenomics" sums up to one of the biggest economics experiments the modern world has ever seen.
Japan’s government debt is so excessive that, one way or another, many think it will eventually default. But there’s a way Japan can begin sloughing off its debt and growing its economy: by privatizing government assets. In fact, the nature of its debt means that it can’t fix its debt problem without doing that, says Michael Pettis, a finance professor at Peking University’s Guanghua School of Management.

Abenomics, as the program is known, has sent the Nikkei up 25 percent this year. Japan’s economy grew 3.5 percent in the first quarter, outpacing that of the U.S.