Japan's war on deflation runs into psychology of hard times

By Stanley White

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The argument is this will create inflation expectations, which will translate into consumption and in turn boost economic growth.

Note to politicians: This has NEVER worked. But it sure sounds plausible to the layman, and it gives government all the money it wants without raising taxes.

The problem with free wheeling money printing and "expectations of inflation" is that it can lead to hyper inflation, or even regular inflation.

In the U.S. between 1977 and 1982, the dollar lost fifty percent of it's value.

Does Japan really want that?

Sure, on the surface, a weak yen may look good for exports, but Japan has to buy all their raw materials with that same weak yen. Kind of defeats the purpose.

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households plan to spend less when they expect incomes to stagnate

You reading that PM Abe. The Japanese people are retrenching. So if you introduce target inflation you will contribute to the global slump by your policy mistake. The risks of slipping back to deflation are high.

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I love deflation..! Rock on!

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Is Abe only looking at monetary easing from a consumer point of view? Even with the low interest rates in place already (further easing will lower interest rates even more - but we're so close to zero anyways) Businesses have been reluctant to expand their operations and the low rates have done nothing to kick start the economy

Good luck trying to scare people into buying new cars, homes, appliances, etc...

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Japan really is stuck in recycle mode, isn't it. No new ideas, no new politicians, nothing new at all. Instead, more of the same, over and over. Japanese people are compulsory shoppers but is really the only recipe for success? Shop till you drop?

Seems to me what Japan would benefit from is a societal reformation. Let the population shrink a little, start modernizing your working conditions, get more ladies into all businesses to make those fat-assed oyaji a little nervous, educate a new breed of students, who perhaps, could be a little more innovative and free thinking than their parents and grandparents.

I work for a foreign company, so doused with the Japanese mentality of gaman and yes-men mentality I feel like puking. People do as they are told by their manager absolutely no more or less. The notion of doing the beat work you can by speaking your piece and offer fresh ideas is non-existant. Instead, people show their support by punching out at 1700 and sit around doing who knows till midnight. Very depressing not to mention inefficient.

But I guess fear is rooted to deep in people who were subdued during hundreds of years by warlords...

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