Facets of Japenses slump:

1. stock market crashed firstly,

2. when stock price and land price collapsed, the value of collateral fell. This leaded to bank run. Less investment was financed.

3. fall in price level leaded to the destabilizing effect of deflation.

4. low interest means a liquidity trap, making monetary policies less effective.

All these contribute to a severe shock to AD. AD curve moves leftwards to a lower GDP. In long run, the AS is determined by capital and labour, not by price (monetary policy is ineffective in long run), the price level will fall to a level that GDP goes back to its natural level.

Above is my brief suggestion.

关于日本的长期不景气情况,现在还没有一个综合的解释.它的起因,发展过程,解决方法等有各种各样的意见.只从AD-AS曲线来解释的话,不全面.楼上的解释应和信任美联储议长BERNAKE的financial accelerator的理论一致.But I can not agree with your "severe shock to AD". If we dont consider the political reasons, the overinvestment in the bubble period is the main explaination to cause the banks' credit crunch. of course there are other factors to extend the Japanese economy depression, such as the plaza agreement, IT bubble in the early of this century, and the political instability. The Jap's experiences should be helpful to china monetary policy. I hope so. welcome to discuss further.