Contents
Introduction
I. Current overview of Japanese Economy
II. Japan's Deflation since the 1990s
III. Why Is Deflation a Problem?
IV. Japan's General Price Deflation since the 1990s and the Debt Burden of Borrowers
V. The Negative Financial Accelerator in Japan since the 1990s
VI. Policies to Deal with the Problems
References
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Introduction
There is much confusion in popular discussion of Japan's deflation and associated economic problems. This confusion tends to arise from a failure to distinguish between three related, but different phenomena: the stagnation of the real side of the economy, the deflation of general prices, and the deflation of asset prices. The deflation of general prices has certainly persisted since the mid- or late 1990s, depending on the price index one looks at. However, the extent of the price decline has been mild. The cumulative decline in the consumer price index (CPI) since its peak in 1998 has been no more than about 3%. It is hard to believe that such mild declines in general prices have been the root cause of the stagnation of the economy.
Declines in asset prices since the 1990s in Japan have been as large as they were during the Great Depression. Both TOPIX and the price index of urban commercial land have plummeted by 70-80% from their peaks. The collapse in asset prices has had serious effects on Japan's financial system, and in turn, on the economy, including general prices. In this short paper I attempt to discuss the relationship between such deflationary forces.
In section one, We first discuss the general view of current Japan's economy so, we can make out some tangible results. Moreover this Deflation issue ...