Japan began experiencing sporadic failures of financial institutions after 1991 once the bubble burst.
These were confined to relatively small institutions and were generally regarded as isolated events
with limited systemic implications. Although stock prices had been declining since the beginning of
1990, there was a general optimism that once the aftermath of the bubble economy had been
cleaned up, the economy would be back on track towards a more balanced and sustained growth. In
fact, the economy had continued to show a positive growth rate, albeit at a slower pace. This led to an
expectation that asset prices, and thus collateral value would sooner or later pick up again and
eliminate the threat to the financial system. This general expectation allowed the authorities to adopt a