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Is the deflationary spiral we are seeing in Japan ultimately good or bad for the economy?

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Clearly bad for psychological reasons. Workers are getting paid less and less money for doing more and more work in this recession. That tends to create a national sense of malaise.

The econ 101 textbook explanation that deflation supresses consumption doesn't apply in Japan. Consumers have already had 20 years to get used to it and are consuming as much as they can, hence the shrinking savings rate.

Mortage-paying homeowners, however, are getting screwed.

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Not nearly as bad as the media use of Japocalypse Now style phrases like "deflationary spiral" - especially when they're completely inaccurate.

Japan's inflation rate for 12/2010 was Zero, down a tenth from November. Japan hasn't been in a dangerous deflation position (ie over 2%) since July of 2009. And the rate of inflation hasn't been negative at all since September of 2010.

The current situation would best be described as "An inflation rate hovering around zero per cent". And ultimately that's a pretty decent place to be - it's both good and bad depending on where you are in the economy, but neither is to any extreme.

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The only thing in deflation are home prices and our salaries for those who work for someone. If you are an owner, you are taking advantage of paying less in salary and therefore making more. I went to a used dealership and asked about their interest rate. 7.7!! And you would think we are in a recession and therefore people arent able to pay and so low demand for cars and so one would assume dealers offering incentives like low interest rates..not in japan...

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I have seen wages going down and certainly have seen prices going up. What`s up with that? I agree with lovejapan21.

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about the only thing going down is property & buildings which for the most part have been massively over valued because the real estate industry has way too much control & manipulates to their advantage so I wud say its good.

As for peoples wages, new hires are getting less, others who have been working I rarely hear about drops in pay. Now if yr talking about people who get ""bonuses" well I dont feel sorry for them much because to me it was plain as day 20yrs ago when I first got here that this was NO BONUS AT ALL, but a way for companies to cut salary without having to negotiate, everyone around me said I was wrong, then in 95-96 the "bonus" started getting cut! And now it shud be common knowledge.

So folks insist you get paid without the "bonus" system, and if you have a mortgage for gods sack DO NOT do the bonus barai as its a disaster.

I am starting to see some better value in retail which is also about bloody time, people need to realize we all have to pay for the massive inefficiency here & still make the owners rich, that costs! But shudnt cost nearly as much as we have to pay!

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one more note on electronics. WAy way over priced compared to NA. For example this robot vacuum, same model, sells for less than 27,000 at cosco in canada vs 70,000 at Eiden.

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one more note on electronics. WAy way over priced compared to NA. For example this robot vacuum, same model, sells for less than 27,000 at cosco in canada vs 70,000 at Eiden.

Shop online with Rakuten or Kakaku and you'll be paying a lot closer to the overseas costs. Many electronics goods are very well priced, though.

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Good for retirees on a fixed pension and unemployed people on welfare.

Bad for everybody else.

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Wouldn't have been good opportunity for recovery if government would have gotten out of the way. Deflation creates a massive bargain for investors.

It punishes the people who live beyond their means and rewards people who save and live responsively.

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As a full-time worker with a fairly secure future, I think it's good for those in the same boat! Lower prices means more savings for me (naturally) plus better options for my hard-earned yen!

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KansaiTruth. Where are these lower prices you are talking about? Price of food is up. The price to heat your home and to drive are up. The price of travel is up. Ok. The price of electronics is coming down but most people already have those things. The newest and latest ones are just luxuries.

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bad. we all know that,

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i'd say it's a "rationalizing of the economy" type adjustment.

unfortunately, the only people getting rationalized are those who bought into the "wealth creation" mythology of the finance industry criminal class and their keiretsu politico cronies.

like in the usa, they sold a bogus economic model built on funny money, and now that they have pilfered the treasury, everyone else is left holding the ball after the whistle has blown, game over!

only it's not a laughing matter for a growing number of people. hopefully this will raise the level of attention paid by the general populace to what the politicos and their well-heeled cronies in the cross-shareholding insular world of finance and corporate japan are doing (or not doing).

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The worldwide economy certainly has a lot more ponzi aspects then in the past. I remember when I graduated HS & when I started working brokers began chasing earier to buy stocks, that was when you wud buy & hold for the future, at least 5-10yrs down the road, then came mutual funds which I think were a good idea, but since then its just got more & more insane & 99% of what wallstreet etc does has next to NOTHING to do with traditional investing, it quickly just became a game of shifting $$ around & around & inventing new ways(supposedly better) to continue to rack up commissions or sell.

Bottom line is reality has been highly perverted by these types & govts are now highly involved, in short its no longer going to work, when have seen many examples already. Next time the goldman sucks & their ilk need to fail, crash & burn in hell imo.

Folks its simple we need to go back in time to when investing was more sensible, with purpose, honesty, when have none of that now. And it needs to be sustainable, the ole growth growth thing will no longer work for most of the economy except in emerging markets.

Lets hope we can fix it & survive with a decent std of living but I have my doubts, glad I aint so young & now kids to worry about, but I do worry for those that do!

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