Most of the literature I can find about deflation in Japan takes for granted that deflation is bad for the country. I can also find a lot of literature on why deflation is bad in theory. Is there any analysis of the 20 years of deflation in Japan and its specific consequences?

I guess it is a wonderful recent study case of deflation, to be compared with the established view on the subject, so someone must certainly have done it. Can you point to such literature?


1 Answer 1


Here is some evidence from third-party colleagues who have been to Japan in the 90s and recently visited again last year. He informed me that prices were the same as in the 90s or lower.

This is definitely the result of deflation working in Japan.

Another example of deflation in action is a report you can read here: https://www.ozy.com/fast-forward/back-to-the-future-japanese-youth-flee-cities-for-the-countryside/87547

While here in the United States, most people don't get why someone like myself who works in the tech/economics field would want to own a small farming business, the youth of Japan do get it and they are moving back to rural villages and renting large traditional farm houses and adjoining land for $200/month, which is a fraction of what they were paying in cramped up studios in the city. This is an example of deflation in action where young Japanese citizens are abandoning costly housing, transportation, etcetera and adopting lifestyles that generate far less income and far lower expenses, both are deflationary.

So what are the consequences for these young people in Japan? Less stress, better health, higher quality of life overall? You would have to read the article and make your own conclusion.

You were not specific on consequences for whom.

The Bank of Japan has tripled its asset purchases:BOJ Balance Sheet 2017

This has had little apparent effect on conventional measures of inflation. The purpose is to offset deflationary declines but it has not worked and its starting to burden the State. So those are consequences the State of Japan will have to deal with. They may try to pass that off to its citizens the way our government does here, but as you have seen above, more and more Japanese are fleeing to a simpler life in the countryside.

All this new spending on the part of the BOJ may lead to mal-investment and systemic asymmetries that will eventually destabilize the entire financial system.

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    $\begingroup$ For what I understand from your answer, there seems to be no scientific consensus that deflation is so bad that is should be avoided at all costs, what is what every central bank in the world tries to do for the best part of a century. I am no economist, I am just another paranoid believing bankers runs central banks in a worldwide scheme to drain money from the productive economy, and you just fueled it. $\endgroup$
    – lvella
    Commented Jan 7, 2019 at 19:02

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