Japan's rising surpluses in balance of trade with the United States, in addition to its influential economic power built up over the years, prompted the Americans to pressurise Japan in 70s-80s to immensely revalue its Yen upwardly.
To this, Japan gave in and kowtowed to the American demands - both to its advantage and disadvantage.
After Yen was massively appreciated, Japan lost its competitive edge in exports. In short, Japan could no longer rely on its cheap currency to compete in international export markets.
Instead, Japan had to stand up to the tougher trading environment with quality and efficiency.
The qualitative factor took Japan to even further by leaps and bounds and enabled the nation to swim against the current. With this change in mindset, Japan did impressively well and outperformed most other countries.
But the appreciating Yen also drew in huge speculative funds or hot money to bet on the currency. The foreign funds together with the local excess liquidity inflated the Japanese asset prices enormously - so much so that, at a later stage, the speculative drive turned the property markets into bubbles.
Eventually, in 1990, the property bubbles in Japan burst , causing a terrible havoc to the nation. Nikkei index simply melted down from a height of 40,000 points, wiping out massive wealth of Japanese. The property prices, especially those in Tokyo, slumped down to the bottom. All these sent corporations and individuals alike to join in endless queues of bankrupts.
The chain effects affected the Japan's economy badly, causing it to go into recession for a period of more than 12 years.
During this period, Japan also adopted zero - interest monetary policy to prop up the economy and to lead the nation out of deflation.
Towards the end of 2002, Japan finally started to see twilight of recovery.