Editing Deflation (section)

===Japan===
{{More citations needed section|date=September 2010}}

Deflation started in the early 1990s.<ref name="academia.edu"/> The [[Bank of Japan]] and the government tried to eliminate it by reducing interest rates and "[[quantitative easing]]," but did not create a sustained increase in broad money and deflation persisted. In July 2006, the zero-rate policy was ended.

Systemic reasons for deflation in Japan can be said to include:
* [[Money supply#Japan|Tight monetary conditions]]: The Bank of Japan kept monetary policy loose only when inflation was below zero, tightening whenever deflation ends.<ref>{{cite web|url=http://www.themoneyillusion.com/?p=7337 |title=Meet the new BOJ, same as the old BOJ |publisher=TheMoneyIllusion |date=2010-10-05 |access-date=2013-02-14}}</ref>
* [[Demographics of Japan|Unfavorable demographics]]: Japan has an aging population (22.6% over age 65) which has been declining since 2011, as the death rate exceeds the birth rate.<ref>{{Cite news|last=Dooley|first=Ben|date=2019-12-24|title=Japan Shrinks by 500,000 People as Births Fall to Lowest Number Since 1874 (Published 2019)|language=en-US|work=The New York Times|url=https://www.nytimes.com/2019/12/24/world/asia/japan-birthrate-shrink.html|access-date=2021-02-04|issn=0362-4331}}</ref><ref>{{Cite web|date=2019-06-06|title=Statistics Bureau Home Page/Population Estimates Monthly Report|url=http://www.stat.go.jp/english/data/jinsui/tsuki/index.html|archive-url=https://web.archive.org/web/20190606203315/http://www.stat.go.jp/english/data/jinsui/tsuki/index.html|url-status=dead|archive-date=2019-06-06|access-date=2021-02-04}}</ref>
* Fallen [[asset]] prices: In the case of Japan asset price deflation was a mean reversion or correction back to the price level that prevailed before the asset bubble. There was a rather large [[price bubble]] in [[stock]]s and especially [[real estate]] in Japan in the 1980s (peaking in late 1989).<ref>{{Cite web|last=Nielsen|first=Barry|title=The Lost Decade: Lessons From Japan's Real Estate Crisis|url=https://www.investopedia.com/articles/economics/08/japan-1990s-credit-crunch-liquidity-trap.asp|access-date=2021-02-04|website=Investopedia|language=en}}</ref><ref>{{Cite web|last=Post|first=The Blah|date=2019-11-17|title=Japanese Asset Price Bubble|url=https://medium.com/@swatisudhakaran/japanese-asset-price-bubble-48bc1639f666|access-date=2021-02-04|website=Medium|language=en}}</ref>
* Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid. The banks could try to collect on the collateral (land), but this wouldn't pay off the loan. Banks delayed that decision, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks made even more loans to these companies that are used to service the debt they already had. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law have been suggested as methods to speed this process and thus end the deflation.<ref>{{Cite web|last=Group|first=Global Legal|title=International Comparative Legal Guides|url=https://iclg.com/practice-areas/restructuring-and-insolvency-laws-and-regulations/japan|access-date=2021-02-04|website=International Comparative Legal Guides International Business Reports|language=en}}</ref><ref>{{Cite web|title=Practical Law UK Signon|url=https://signon.thomsonreuters.com/?productid=PLCUK&viewproductid=UKPL&lr=0&culture=en-GB&returnto=https%3a%2f%2fuk.practicallaw.thomsonreuters.com%2fCosi%2fSignOn%3fredirectId%3drt_a4870076-2703-4605-97ff-f08574fb3b5b&tracetoken=0204210942140CvCsgoHJiMwaBw39XiWjYkZf7BuLWKhdD4IKQLRqkuKTNqq0uY7L-SNnb6hW5HJa_sHPQSMcrBJvtle0FRWi-kHms5dRA6MV8ZxXPCuxInbgcBE3ulPDB2z7jH1JUsZlNV_soxJ41jUzrYlUcZ7KaQ8YvWfzC2AXiVHYTeGKljRk8Bf2NxoS7YZVRmexAcKyWC8dnsRYP0pDDfB_ChO0JlUZykNMghFRGv-ye4yf3PPTtEMKJEh8jgl_D3s0C1zCeYs8Sq4HgQxBjl5XvbbK0YqbM7cru3kAM6t9DMvOVqcwdqzT3rq99Oc8xou-BUuB_KnlWcGfZFt6jFLkw2cta7S9D9F-eUxOzifxbSqBOrMjeC5Eza68vFPFsUV1IvRG|access-date=2021-02-04|website=signon.thomsonreuters.com}}</ref><ref>{{Cite web|date=2021-01-13|title=Japan's 2020 corporate bankruptcies fall to 31-year low with government aid|url=https://www.japantimes.co.jp/news/2021/01/13/business/corporate-business/japans-2020-corporate-bankruptcies-fall-to-31-year-low-government-aid/|access-date=2021-02-04|website=The Japan Times|language=en-US}}</ref><ref>{{Cite news|date=2002-05-09|title=Prize possessions|newspaper=The Economist|url=https://www.economist.com/finance-and-economics/2002/05/09/prize-possessions|access-date=2021-02-04|issn=0013-0613}}</ref><ref>{{Cite news|date=2020-09-24|title=What to do about zombie firms|newspaper=The Economist|url=https://www.economist.com/leaders/2020/09/24/what-to-do-about-zombie-firms|access-date=2021-02-04|issn=0013-0613}}</ref>
* Insolvent banks: Banks with a larger percentage of their loans which are "non-performing", that is to say, they are not receiving payments on them, but have not yet written them off, cannot lend more money; they must increase their cash reserves to cover the bad loans.<ref>{{Cite web|title=Is the Bank of Japan Technically Insolvent? Dangers Involved in Long-Term Deterioration of BoJ Financial Position {{!}} Discuss Japan-Japan Foreign Policy Forum|url=https://www.japanpolicyforum.jp/economy/pt20180222185219.html|access-date=2021-02-04|website=www.japanpolicyforum.jp|archive-date=2021-02-09|archive-url=https://web.archive.org/web/20210209020705/https://www.japanpolicyforum.jp/economy/pt20180222185219.html|url-status=dead}}</ref><ref>{{Cite news|title=Nippon Credit Bank declared insolvent and nationalised|url=https://www.irishtimes.com/business/nippon-credit-bank-declared-insolvent-and-nationalised-1.225394|access-date=2021-02-04|newspaper=The Irish Times|language=en}}</ref>
* Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.{{dubious|reason=No reasoning given for how real estate prices slow growth, and this directly contradicts the paragraph above which pins deflation on falling real estate prices and banks hoping for some price increases before they realise their losses.|date=November 2017}}
* Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods (due to lower wages and fast growth in those countries) and inexpensive raw materials, many of which reached all time real price minimums in the early 2000s. Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary.<ref>{{Cite web|last=|first=|date=|title=|url=https://www.frbsf.org/economic-research/files/wp08-29bk.pdf |archive-url=https://web.archive.org/web/20140308154019/http://www.frbsf.org/economic-research/files/wp08-29bk.pdf |archive-date=2014-03-08 |url-status=live|access-date=|website=}}</ref><ref>{{Cite web|title=New Japanese Import! Deflation|url=https://www.bullionvault.com/gold-news/deflation-japan-061720151|access-date=2021-02-04|website=www.bullionvault.com|language=en-US}}</ref>
* Stimulus spending: According to both Austrian and monetarist economic theory, Keynesian stimulus spending actually has a depressing effect. This is because the government is competing against private industry, and usurping private investment dollars.<ref>{{cite web|url=http://butnowyouknow.net/2009/07/15/why-stimulus-spending-depresses-the-economy/|title=Why Stimulus Spending Depresses the Economy|work=But Now You Know|date=16 July 2009}}</ref> In 1998, for example, Japan produced a stimulus package of more than 16 trillion yen, over half of it public works that would have a quashing effect on an equivalent amount of private, wealth-creating economic activity.<ref>{{cite web|url=https://mises.org/daily/1099|title=Explaining Japan's Recession, Benjamin Powell|work=Mises Institute|date=19 November 2002}}</ref> Overall, Japan's stimulus packages added up to over ''one hundred trillion'' yen, and yet they failed. According to these economic schools, that stimulus money actually perpetuated the problem it was intended to cure.<ref>{{Cite web|last=Ponciano|first=Jonathan|title=World Bank Warns Stimulus Spending And 'Dangerous' Debt Crisis Could Trigger Recession And Wipe Out A Decade Of Income Gains|url=https://www.forbes.com/sites/jonathanponciano/2021/01/05/world-bank-warns-stimulus-and-dangerous-debt-crisis-could-trigger-recession-and-wipe-out-a-decade-of-income-gains/|access-date=2021-02-04|website=Forbes|language=en}}</ref><ref>{{Cite web|last=Salsman|first=Richard|title=Japan's Three Decades of Depressive Stimulus Schemes – AIER|url=https://www.aier.org/article/japans-three-decades-of-depressive-stimulus-schemes/|access-date=2021-02-04|website=www.aier.org|date=3 June 2020 |language=en-US}}</ref>

In November 2009, Japan returned to deflation, according to ''[[The Wall Street Journal]]''. [[Bloomberg L.P.]] reports that consumer prices fell in October 2009 by a near-record 2.2%.<ref>{{cite web|url=https://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKEgYWoMAWIc|title=Japan Releases Stimulus Package as Recovery Weakens (Update3)|website=[[Bloomberg News]]|date=16 August 2023 }}</ref> It was not until 2014 that new [[Abenomics|economic]] policies laid out by [[Prime Minister of Japan|Prime Minister]] [[Shinzo Abe]] finally allowed for significant levels of inflation to return.<ref>{{Cite news|date=2014-05-30|title=Japan inflation rate hits 23-year high|language=en-GB|work=BBC News|url=https://www.bbc.com/news/business-27615551|access-date=2021-02-04}}</ref> However, the [[COVID-19 recession]] once again led to deflation in 2020, with consumer good prices quickly falling, prompting heavy government stimulus worth over 20% of GDP.<ref>{{Cite web|date=2020-04-06|title=Abe unveils 'massive' coronavirus stimulus worth 20% of GDP|url=https://www.japantimes.co.jp/news/2020/04/06/business/shinzo-abe-japan-massive-coronavirus-stimulus/|access-date=2021-02-04|website=The Japan Times|language=en-US}}</ref><ref>{{Cite news|last=Kihara|first=Kaori Kaneko, Leika|date=2020-12-18|title=Japan's consumer prices fall at fastest pace in decade, stoke deflation fears|language=en|work=Reuters|url=https://www.reuters.com/article/us-japan-economy-inflation-idUKKBN28S05V|access-date=2021-02-04}}</ref><ref>{{Cite web|date=2020-05-01|title=Deflation fears reignited as pandemic hits consumer prices in Japan|url=https://www.japantimes.co.jp/news/2020/05/01/business/economy-business/deflation-pandemic-consumer-prices/|access-date=2021-02-04|website=The Japan Times|language=en-US}}</ref> As a result, it is likely that deflation will remain as a long-term economic issue for Japan.<ref>{{Cite web|last=FocusEconomics|title=Japan Inflation Rate (CPI) - Japan Economy Forecast & Outlook|url=https://www.focus-economics.com/country-indicator/japan/inflation|access-date=2021-02-04|website=FocusEconomics {{!}} Economic Forecasts from the World's Leading Economists|language=en}}</ref>