Thus in summary, the crisis of 1997 was very different from Japan as compared to her Southeast Asian neighbors. For the latter, it was due to the fact that investors (mostly from foreign banks who had made short-term loans) all began to pull out their assets at the same time. What resulted was a combined banking and currency crisis. The difference in Japan however is basically due to the inefficiency of her service sector. Being a traditional, values and self-oriented country, it was slow to adapt to new ideas. Japan was slow to adapt to new technologies. These things may be simply stated, but the visualization of such leaves us with startling effects.

Internally however, what may be seen as a virtue has become Japan’s biggest downfall – the caution and thriftiness of the Japanese consumer. The Japanese really do save. Most households save more than the businesses of Japan can be convinced to invest, even at astoundingly low interest rates. Thus for the first time since the Great Depression in the 1930s, Japan is experiencing the formidable "liquidity trap," the situation in which the private sector as whole is trying to accumulate real cash. Putting the pieces together, we have the businesses trying to do business, but at the same time we have the thrifty Japanese consumer. This is why Japan broke.

Numerous solutions have been suggested for Japan. Economists suggest lowering interest rates and the Japanese consumers spending freely. Perhaps capital control is a good solution as well. What has been happening? Bigwig (but ailing) Japanese countries have incurred foreign mergers. Bank reforms are said to have begun. So how will it all end? Hopefully with a jump-start we can see a new and healthy beginning. We will just have to wait and see.

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