Japan, housing crisis and deflation

NPR's Planet Money podcast has an episode on Japan's long term economic slump. The transcript can be found at: Japan had a vibrant economy. Then it fell into a slump for 30 years. The episode puts much of the blame down to the bursting of bubbles in stocks and real estates. People lost a lot of money or wealth, and so they stopped spending and Japan went into a recession. This then led to a banking crisis and sustained deflation.

The ABC's If You're Listening also has an episode on Japan:  How Japan opted out of a global housing crisis. This episode discusses the measures the Japanese government took to lower house prices after they became unavoidable.

I think the two are linked and there are potential lessons for other countries:

• Don't let your real estate prices get too high, keep them affordable. Focus especially on making it easy to increase urban density and reduce red tape around urban development.
  
• If prices do start getting too high, try to bring them under control. But, whatever you do, don't let them come down too much. You really need to avoid sustained deflation.