The Social Consequences of Japan’s Financial Crisis in the 1990s

From the Lecture Series: The Rise of Modern Japan

By Mark J. RavinaUniversity of Texas at Austin

In the wake of Japan’s financial crisis, slow economic growth became the new normal. What were the social consequences of that new normal? To begin, the bursting of the asset bubble did not lead to an immediate surge in bankruptcies or large-scale visible poverty. The aftermath of the asset bubble produced decades of slow, grinding, pain rather than a huge immediate shock.

A businessman sitting on a street bench, worrying about unemployment
Japan’s financial crisis led to an increase in unemployment, effectively causing a ripple effect in society. (Image: Horth Rasur/Shutterstock)

Battling Unemployment

Japanese banks tried to keep weaker companies afloat for a time, largely to avoid admitting that their loans had gone bad. And homeowners turned to secondary markets—basically, loan sharks—to keep making payments.

Consider unemployment. The number of people out of work rose and remained high for years. This affected younger workers, and less educated workers, the most. The World Bank found that unemployment among young Japanese males rose from less than 5% in the late 1980s to almost 12% in 2003. 

The nature of work also changed, especially for those at the bottom of the ladder. During most of the postwar period, the Japanese economy had been characterized by lots of full-time, long-term jobs. About 85% of the workforce was in so-called “standard” employment in the 1980s. So, only 15% were contract workers, part-time workers, and gig workers.

But that 15% grew to over 35% in 2012. And the Japanese government did not have a well-developed plan to address the huge increase in workers who were drifting in and out of employment. So, while formal Japanese unemployment never got very high by international standards—it never broke 10%—tent cities of homeless, unemployed, and displaced contract workers began to appear in Japan’s urban areas.

A homeless man
Even though Japan’s unemployment caused by its financial crisis didn’t get high by international standards, tent cities for homeless workers began to appear in urban areas. (Image: Icosha/Shutterstock)

High Divorce Rates

The rise in unemployment had a huge ripple effect. First, it brought on an increase in crime. Today, violent crime remains astonishingly low in Japan. The murder rate is between one-tenth and one-twentieth of the US rate. And crimes against foreign visitors are rare. Tokyo remains one of the safest cities in the world to visit. But there has been a surge in petty property crimes, especially shoplifting—notably, shoplifting by the elderly.

In addition, the rise in unemployment changed marriage patterns, causing the marriage rate to drop by about 25%, and the divorce rate to soar. It almost doubled in the years after the bubble burst. As you might expect, increases in divorce impacted middle-aged and older couples the most. 

The divorce rate for men ages 55 to 59 increased nearly two-and-one-half fold between 1990 and 2005. But while the divorce rate was highest for middle-aged couples, the increase was most striking among older couples.

This article comes directly from content in the video series The Rise of Modern JapanWatch it now, on Wondrium.

Oversized Garbage

Among men, much of their lives revolved around work. They worked long hours, and their social lives focused on work. For women, their sphere was at home. So, traditionally, there was a relatively narrow number of joint interactions between husband and wife. But when the asset bubble burst, many Japanese men in their mid-50s were pushed out of work and back home, where their wives had no idea what to do with them. 

One cruel term for such men was sōdai gomi—“oversized garbage”. That referred to things like a huge piece of furniture requiring a special pickup from sanitation services. Another term was nureochiba—or “wet fallen leaves”. That referred to retired men who had nothing to do at home; so, they just wanted to tag along with their wives on errands, sticking to the women’s feet like wet leaves.

The Japanese life insurance giant Dai-Ichi Life produced a series of short articles about financial planning and general life choices for their customers. And one of the articles for men in their 50s had the title “You can have a second life, pay attention to your wife” (“Tsuma e no kikubari ga sekondo raifu no shuppatsuten”). 

The core advice it offered was that you can’t work forever. Even if you find a second job after retirement, and temporarily dodge being labeled “oversized garbage”, that just delays the inevitable. You will eventually need to find new meaning in your life. So why not pay attention to your wife? But many men couldn’t make the transition. Maybe they didn’t read the article. And their marriages crumbled.

The Impact on Children

It wasn’t just long-term marriages that were affected by rising divorce rates. Younger couples also suffered, although the impacts tended to be different. For instance, there was an upsurge in single-parent households. This, when combined with high unemployment for single mothers, led to an increase in child poverty. 

Using a standard international definition, child poverty in Japan rose from 12% in 1995 to 16% in 2012. By comparison, the same figures for the US were 22% in 1995 dropping to 21% in 2012. So, while Japan still looked OK in comparison with other countries, the Japanese numbers were moving in the wrong direction.

The impact on children in Japan was exacerbated because its social safety net was underdeveloped. Japanese family law doesn’t have strong provisions for joint custody or mechanisms for collecting child support. 

Usually, the mother gets the kids, assumes full responsibility for the children—including all financial responsibility—and the father is told to disappear. As a result, Japan has one of the world’s highest poverty rates for single-working parent families—more than 50% compared to 33% in the US.

Common Questions about the Social Consequences of Japan’s Financial Crisis in the 1990s

Q: How did Japan’s financial crisis change the nature of work?

Japan’s financial crisis led to a change in the nature of work itself because Japanese jobs were usually characterized by full-time jobs that people had for long periods of time. But now this had changed since the number of workers who had part-time contracts and gig workers increased significantly.

Q: How did Japan’s financial crisis affect marriage patterns?

Japan’s financial crisis affected the state of unemployment in the country which had a ripple effect on marriage patterns. Marriage rates dropped about 25% and divorce rates soared. The rise in divorce rates affected middle-aged and older couples the most.

Q: What was the connection between the increase in unemployment and the divorce rates rising in Japan?

The increase in unemployment because of Japan’s financial crisis led to many Japanese men who were in their 50s staying at home and not knowing what to do when they were used to working long hours and not being in the house. Japanese women also weren’t used to so many interactions with their husbands. So this led to an increase in divorce rates.

Keep Reading
1985-1990: Japan’s Bubble Economy
Why Did Japan’s Asset Bubble Got So Big?
Japan’s Asset Bubble: Why did it Burst? What Were the Repercussions?