"What happened to "Zombie" Firms in Japan?: Reexamination for the lost two decades" (in Japanese)

The Japanese economy experienced prolonged recessions during the 1990s and the 2000s. Until the early 2000s, evergreen lending to "zombie firms" had distorted market discipline in terms of stabilizing the Japanese economy. A majority of the "zombie" firms recovered during the first half of the 2000s. However, deflation in Japan still persisted even in the 2000s. The purpose of this paper is to investigate how zombie firms recovered in Japan. We investigate the nature of corporate restructuring that was effective in reviving zombie firms in the 1990s and the 2000s. The regressions suggest that cost cuts such as reducing the employee strength of zombie firms and selling its fixed assets were beneficial in facilitating their recovery. However, sales growth was ineffective for the recovery especially in the 2000s. The results may suggest that corporate restructuring without innovations may be responsible for the Japan's prolonged deflation in the 2000s.