Japan had been in a recession for about two years, and the Japanese government tried a variety of stimulative measures to induce economic recovery. The economy expanded modestly in the first and second quarters of 1999 and Japanese authorities thought that their policies had caused an economic turnaround. However, the economy contracted during the July-September quarter by 3.8 percent and the head of Japan's Economic Planning Agency just announced that economic growth in the fourth quarter is expected to also be negative. Two consecutive quarters of negative growth means that Japan's recession has resumed.

Japanese Prime Minister Keizo Obuchi came to power in 1998. His economic program relied upon massive government spending program to turn the economy around. The ratio of debt to gross domestic product (GDP) increased to 130%, the highest of any major industrialized nation. After five consecutive quarters of contraction, the economy increased by a modest 1.5% in the first quarter and another 1.5 % in the second quarter. Authorities believed that their spending program had rekindled spending and stimulated growth to the point where economic growth would be self-sustaining. As a consequence they abated their spending in the third quarter. The authorities were wrong - the economy contracted by 3.8%. The Japanese government continued to provide upbeat assessments of the strength of the economy; however, sluggish consumer spending resulting in part from a reduction in worker bonuses was responsible for what will likely be a fourth quarter decline.

(Updated March 1, 2000)