This paper examines the Japanese economy in the 1990s, a decade marked by economic stagnation. The authors find that the issue is not a breakdown of the financial system, as corporations of all sizes were able to secure financing for investments. There is no evidence that profitable investment opportunities were not exploited due to a lack of access to capital markets. Instead, the problem is attributed to a low productivity growth rate. The authors argue that growth theory, when treating Total Factor Productivity (TFP) as exogenous, provides a good explanation for the Japanese lost decade of growth. They suggest that research efforts should focus on policy changes that could stimulate rapid productivity growth.This paper examines the Japanese economy in the 1990s, a decade marked by economic stagnation. The authors find that the issue is not a breakdown of the financial system, as corporations of all sizes were able to secure financing for investments. There is no evidence that profitable investment opportunities were not exploited due to a lack of access to capital markets. Instead, the problem is attributed to a low productivity growth rate. The authors argue that growth theory, when treating Total Factor Productivity (TFP) as exogenous, provides a good explanation for the Japanese lost decade of growth. They suggest that research efforts should focus on policy changes that could stimulate rapid productivity growth.