Japan's Bad Debt Problem For Study

After the collapse of "bubble economy" in the early 90s last century, huge amount of non-performing loans were aroused. In general, throughout the last decade of 21 century, the macro-economy of Japan was getting worse. The phenomenon of lacking domestic demand, shrinking investments, falling price and deflation was a big issue. The measures were not helpful, in reverse, worsening the situation. Under this background, financial crisis and credit crunch appeared in Japan, while financial institutions went bankrupt one after another-- the myth of "banks never bankrupt" was thoroughly disillusioned. Under the pressure of huge non-performing loans, "treasuring the loan" was quite common in Japanese banks. The economy of Japan was seriously influenced, and fell into a long-term stagnation for 10 years. Until March 2002, non-performing loans in Japan were keeping increasing. Facing such stern situations, the Japanese government realized the seriousness of non-performing loans and carried out a series of policies which are compulsory. It was emphasized that "bear the pain" to focus on handle the non-performing loans and speed up economic reform and structure adjustment. Thus, after October 2002, the non-performing loans in Japan trended to decline rapidly. In March 2005, the Bank of Japan announced that non-performing loans had been eliminated and the problem which had plagued Japan for a long period was resolved.The article is composed by four chapters. In Chapter 1, the issues were pointed and relevant concepts, criteria of classification and the trends of changes were explained. The main point is the significant influence of non-performing loans to Japan's economy. After analyzing the reasons why the non-performing loans continued increasing and the facts alleviated it in Chapter 2, the procedures and measures undertaken to handle the non-performing loans in different periods was introduced in the third chapter. Finally, Japanese experiences of handling non-performing loans and the lessons which are practical in China were summarizes in Chapter 4. Meanwhile, certain countermeasure and suggestion to the nature were pointed out.