This paper aims to learn lessons on domestic-demand-led economic growth by analyzing
the Japanese economy. In particular, this paper will first by take a long-term overview of
the Japanese economy and analyze both the post-Plaza-Accord bubble economy in the late
1980s and the economic recovery of the early 2000s. The lessons learned from analyzing
these two periods are the significance of monetary policy and ending deflation.
Specifically, the significance of monetary policy refers to the importance of the basic
concept that “The role of monetary policy is to adjust economic fluctuations while
monitoring inflation rate and economic trends.” In addition, Japan has been in a deflation
for over 10 years, and an end of deflation is an essential condition for the Japanese
economy to make a domestic-demand-led recovery.