Back in June 1997, Paul Samuelson, a Nobel Prize laureate in economics, wrote an article in which he noted:
"The 1990s have brought gloom to Japan ... I have been critical of the passive acceptance by Japan of its continuing slump. A program of deregulation and privatization is a good thing for long-run efficiency and growth. But no nation ever cured a short-run recession or depression with such a program. What will be needed is vigorous use of fiscal expansionism."
In July 1997, just a month after Samuelson's article was published, the Asian financial crisis broke out. The ensuing contraction of domestic demand in East Asia and appreciation of the yen weakened Japanese exports. A series of expansionary fiscal measures were introduced in Japan in vain to reflate the domestic economy and turned its fiscal position into the worst among advanced countries.
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