My take is that the Japanese interest rates were low because wealth - and they gathered a LOT of it being diligent exporters - is pretty evenly spread in Japan (much more so than most other countries) and Mrs Watanabe preferred to keep her money patriotically stashed in the Post Bank or JGBs.

But as alternatives to getting derisory returns on debt, the Japanese began to pitch in to property and stocks, and even levered up to do it. Eventually it all went pear-shaped and credit started to drain out of the system in a classic debt deflation.

Now, turning to your points, firstly, while US players had quite a role in developing the futures markets, and providing liquidity, don't forget that derivatives - particularly cash-settled index derivatives like the Nikkei - are the tail, not the dog. There may have well have been margined stock buying - I'm not sure of the extent of that, and don't forget the extent to which Japanese corporations hold stock in each other. But the point is that derivatives followed the market, and did not lead it.

Secondly, when bonds are at or near zero; stocks are collapsing, and property too, then the more risk friendly Mrs Watanabes who had been in those domestic markets finally had nowhere else to go than overseas

European Tribune - Comments - What really caused Japan's Lost Decade?

the Japanese could not impose severe capital restrictions to ensure that cheap money actually stayed in Japan and did what it was supposed to.

Capital restrictions are only of use to protect currency eg Mahathir of Malaysia putting two fingers up to the global markets and coming out just fine. But currency weakness is hardly a problem for Japan.

The mistake you make here, and it's exactly the same cosmic misapprehension - particularly in relation to the nature and effect of QE - that permeates almost all conventional economics, is that keeping Yen in the domestic financial economy doesn't mean that Yen gets out into the real economy. It didn't; it still doesn't; and it never will. Conventional economics is bollocks in many respects, but particularly because its assumptions in respect to money and credit are diametrically wrong.

The point is that in order to be effective money must be lent or spent into the economy, and that requires fiscal, not monetary, action.

Governments abdicated credit creation to private banks hundreds of years ago, but if banks are unwilling or unable to lend or spend money into circulation then it is incumbent on governments to do so directly, through the creation of Public Credit (aka QE). Allocation of such Public Credit would ideally be managed professionally by someone with a stake in the outcome (ie banks acting as service providers), and under the supervision of a competent Monetary Authority. There is not and never has been a need for a Central Bank - Hong Kong has never had one, for instance.

It is only ideology that prevents QE funding for investment, public and private, in productive assets. QE is actually LESS inflationary than bank credit to the extent that it comes without unjustified salary excesses, and dividends to shareholders on the capital supporting credit creation.

The Big Lie is that private credit creation by banks as credit intermediaries is necessary: it's not, and it never has been.

"The future is already here -- it's just not very evenly distributed" William Gibson