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Will America follow Japan into a decade of stagnation?
The Economist print August 21st 2008

The country may suffer a decade of stagnation, as Japan did after its bubble burst in the early 1990s. Japan’s property bubble was also fuelled by cheap money and financial liberalisation and - just as in America - most people assumed that property prices could not fall nationally.

When they did, borrowers defaulted and banks cut their lending.
The result was a decade with average growth of less than 1%.

A study by America’s Federal Reserve concluded that Japanese interest rates fell more sharply in the early 1990s than required by the “Taylor rule”, which establishes the appropriate rate using the amount of spare capacity and inflation.

Full text

The Taylor Rule

Could the credit crunch destroy the Eurozone?
The historical precedent is not the Great Crash of 1929.
Rather, it is the Japanese property bubble of 1989 and the deflation and long-term stagnation which followed.
George Irvin, EU Observer, 31/7 2008