Japan lacks the will

  Japan worries about it economic malaise ever since its market crash.  Although even after the 1997 financial collapse, things were by no means terrible. Things simply were not upbeat. Japan still enjoyed first world living standards, they still had a huge inventory of goods and services that could be purchased and sold. But the job prospects and the sense of opportunity waned for much of its younger generation.

  These younger generations still don't sense that there is the same kind of job stability and proper paying jobs compared to their previous generation. But they aren't starving by any means.

  Then the question becomes what has changed since prior to 1997 and after 1997? And I suspect it has much to do with the money supply. Japan's Yen appreciation was fairly bold after the Plaza Accords. And the Japanese government simply could not increase the money supply as it previously had without changes to its trade structure.

  Previously, Japan doubled its money supply every 5 years. Meaning its GDP actually doubled every 5 years. This created quite a bit of inflation, but it also meant jobs were plenty and incomes grew just as fast. But with the Yen appreciation taking hold. Incomes grew even faster than its export lobby would allow. If incomes continued to grow, then at some point the Japanese would actually be exporting more Yen than they would be importing foreign fiat currencies. And the Japanese are very self conscious about this. So I suspect from a Central Government level, they had already decided to cut short the money supply so as to keep jobs scarce and to maintain a reasonable trade balance, although more on the surplus side. Unemployment and stagnant incomes thus becomes a means to prevent consumers from importing more foreign goods and makes it easier to produce goods for exports at a cheaper cost.

Year
1955	8,369,500
1960	16,009,700
1965	32,866,000
1970	73,344,900
1975	148,327,100
1980	240,707,315
1985	323,541,300
1990	440,124,900
1995	493,271,700
2000	501,068,100
2005	502,905,400

Above: Japan Money Supply

 In short, the so called lost decade was self-induced. If they had not been so self conscious of their trade balance and continued forward with a loose monetary policy, the economy would have continued to grow its double digit rates as it had prior to the 1997 collapse.