Hello, and welcome to the History of Japan podcast, Episode 21, The Crash.

It all happened so very suddenly.

In early 1991, Japan was the second most powerful economic force on Earth, and on track

to pass the United States within a few decades.

Already, the talk was that the 21st century would be the Japanese century, and self-congratulation

was the flavor of the day in Tokyo.

One year later, it was clear that something had gone wrong, though no one knew at the time

quite how badly.

Everyone thought this was just a blip on the radar, and soon things would get back to normal.

Today, Japan is still struggling to get clear of that blip on the radar.

The current Prime Minister, Abyshinsel, has tacked his career to his plan to get Japan out

of the economic slump that began in 1991.

So what happened? After all, things were going so well.

To get the answer, we have to go back to 1971, and the final full year in office of Sato

Esaku.

The Japanese system of exports, like we talked about last week, was underpinned by the willingness

of the U.S. government to allow American industry to have its butt kicked in exchange for keeping

Japan in the U.S. orbit during the Cold War. In particular, in the 1960s, the Japanese used

their relationship with the United States to justify keeping their currency artificially weak,

making Japanese goods extremely cheap in the United States.

The whole system is a little Byzantine, but the basic idea was that after World War II,

the United States set up a global financial system referred to as the Breton Woods system,

...