Discussion Paper

No. 2011-24 | July 14, 2011
The Japanese Economy in Crises: A Time Series Segmentation Study


We performed a comprehensive time series segmentation study on the 36 Nikkei Japanese industry indices from 1 January 1996 to 11 June 2010. From the temporal distributions of the clustered segments, we found that the Japanese economy never fully recovered from the extended 1997–2003 crisis, and responded to the most recent global financial crisis in five stages. Of these, the second and main stage affecting 21 industries lasted only 27 days, in contrast to the two-and-a-half-years across-the-board recovery from the 1997–2003 financial crisis. We constructed the minimum spanning trees (MSTs) to visualize the Pearson cross correlations between Japanese industries over five macroeconomic periods: (i) 1997–1999 (Asian Financial Crisis), (ii) 2000–2002 (Technology Bubble Crisis), (iii) 2003–2006 (economic growth), (iv) 2007–2008 (Subprime Crisis), and (iv) 2008–2010 (Lehman Brothers Crisis). In these MSTs, the Chemicals and Electric Machinery industries are consistently hubs. Finally, we present evidence from the segment-to-segment MSTs for flights to quality within the Japanese stock market.

Paper submitted to the special issue
New Approaches in Quantitative Modeling of Financial Markets 

Data Set

  • Data.rar
    [application/rar, 7M]
  • temporal_1.xlsx
    [application/vnd.openxmlformats-officedocument.spreadsheetml.sheet, 110K]
  • temporal_2.xlsx
    [application/vnd.openxmlformats-officedocument.spreadsheetml.sheet, 110K]
  • temporal_3.xlsx
    [application/vnd.openxmlformats-officedocument.spreadsheetml.sheet, 110K]
  • temporal.xlsx
    [application/vnd.openxmlformats-officedocument.spreadsheetml.sheet, 110K]

JEL Classification:

C21, C31, E32, O53



Cite As

Siew Ann Cheong, Robert Paulo Fornia, Gladys Hui Ting Lee, Jun Liang Kok, Woei Shyr Yim, Danny Yuan Xu, and Yiting Zhang (2011). The Japanese Economy in Crises: A Time Series Segmentation Study. Economics Discussion Papers, No 2011-24, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-24

Comments and Questions

Anonymous - Referee Report 1
August 24, 2011 - 16:19

See attached file

Siew Ann Cheong - Reply to Referee 1
August 30, 2011 - 14:18

We worked out this reply before the report from Referee 2 came in. We will have to read through the second referee report before making the necessary revisions, but can respond to the six points raised by Referee here.

Yuji Aruka - Referee Report 2
August 30, 2011 - 11:51

See attached file

Siew Ann Cheong - Reply to Referee 2
September 02, 2011 - 10:05

Our reply to Referee 2 is attached. This consists of mostly followup comments and elaborations to what Referee 2 said. We will based our revision primarily on the comments by Referee 1.