Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.

The parallels are eerie: Like Japan, Britain enjoyed more than a decade of booming growth, fueled by aggressive bank lending and real estate investments. Haunted by the comparison, policy makers here have been extra aggressive in using fiscal and monetary levers in hopes of preventing the type of sustained period of stagnation and banking stasis that plagued Japan for so many years.