What is the 'Lost Decade'

The Lost Decade is commonly used to describe the decade of the 1990's in Japan, a period of economic stagnation which became one of the longest-running economic crises in recorded history.


The Lost Decade is a term initially coined to refer to the decade-long economic crisis in Japan during the 1990's. Japan’s economy rose meteorically following World War II, peaking in the 1980's with the largest per capita GNP in the world. This rise led to increased speculation and soaring stock market and real estate valuations.

In the early 1990's, as it became apparent the bubble was about to burst, the Japanese Financial Ministry raised interest rates, and ultimately the stock market crashed and a debt crisis began, halting economic growth and leading to what is now known as the Lost Decade. While analysts continue to debate the extent of the economic impact of the Lost Decade, the impact was irrefutable. In many cases, property values have still not recovered and Japanese markets have continued to stagnate through the first decade of the 21st century. As a result, many refer to the period between 1991 and 2010 as the Lost Score, or the Lost 20 Years.

The Lost Decade in the U.S.

While the term Lost Decade originated to describe Japan’s sustained economic downturn, the term has also been applied to the first decade of the 21st century in the U.S., which was bookended by two enormous recessions prompted by the burst of the dotcom bubble in 2000 and the housing bubble in 2008.  

The period between 2000 and 2009 witnessed a massive erosion of wealth in the U.S. economy and the slowest period of economic growth in the U.S. in decades. The S&P 500 recorded its all-time worst decade during this period, featuring a total return of dividends at -9.1 percent, an overall performance lower than during the Great Depression of the 1930s.

Additionally, net job growth hovered around zero during this period. Long-term unemployment figures reached record levels, and the U.S. lost more than 33 percent of its manufacturing jobs.

The U.S. economy began to rebound by 2013, thanks in large part to financial stimulus backed by the Federal Reserve and the Obama Administration. By the second quarter of 2013, the U.S. economy saw a record-high household net worth figure of $74.8 trillion, which assisted the stock market to surge and home prices to rebound. By the end of 2013, the Dow Jones and S&P 500 also reached new highs.

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