Cheaper tomorrow? BOJ battles entrenched 'deflation mindset'

By Lisa Twaronite and Stanley White

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“The fact is that people don’t feel confident about the future,” Sakai said. “Our society and economy has tilted people towards lower-end options. For example, it’s like people choosing to eat at fast-food places, or standing-only soba shops even when they could, realistically, eat at proper restaurants.”

Better grasp of how the current Japanese economy is functioning than either the BOJ or Abe.

2 ( +6 / -4 )

Has anyone here ever actually put off a purchase in the expectation that it will be cheaper in the future because of deflation? I never have, so the logic seems flawed to me, but maybe others actually do think that way. Anyone?

9 ( +10 / -1 )

@Strangerland I strongly agree with you. Unless we had something like 10% deflation and more no one is gonna put off a purchase for that reason. 2% of inflation also want push me to buy something sooner, but it may scare me not to buy it all. I have lived in a country that used to have inflation of 18% and yes no one was saving money but also no one had any savings. Whatever you were earning was running out and it was only on the basics stuff.

0 ( +1 / -1 )

I agree also. this whole myth of deferrinvg purchases because of deflation has always struuck me as an economic theory construct that doesn't resonate in the real world. Rather stagnation or deflation leads to less spending as people don't believe that they have a secure future and so hoard money.

2 ( +3 / -1 )

Especially in Japan, we need peer-to-peer, decentralized currencies like Bitcoin and NEM. Money is a representation of a person's life force and it doesn't make sense to let bureaucrats arbitrarily change the value of it.

0 ( +1 / -1 )

I never have, so the logic seems flawed to me, but maybe others actually do think that way. Anyone?

This is often the argument (excuse) given, that deflation kills spending, but it's false.

Think of it this way.

Somebody wants something NOW more than they want it LATER. (all else being equal)

In order for this often trotted out excuse to be valid, the present value of a future good with a cheaper price must be HIGHER than the present value of a present good at a slightly higher price.

Meaning the average consumer would compare something for 100 yen NOW vs that same thing for 90 yen a year from now.

But that thing a year from now is worth less anyway, since it's way out in the future, compared to now.

Also, please consider this.

If EVERYTHING was getting cheaper every year, people would be MORE LIKELY to buy stuff NOW, because they would imagine the buying power of their yen in the future to be STRONGER, so they could buy more stuff, as if they have more money.

It would be the same as somebody expecting a ten percent raise in the future and going out to buy stuff now in expectation of having more money later.

More money later or stronger money later is the same thing.

So this government "deflation stops buying" is pure nonsense, The desire for inflation is NOT TO HELP THE ECONOMY.

It's merely to make it easier for the government to pay off their debt. THAT IS THE ONLY REASON.

-1 ( +1 / -2 )

I do not think this is the time to drive the economy to inflation. I don’t think inflation is the end solution. Deflation, in a certain way, is good.

No, both inflation and deflation are bad.

As I said this over and over on JT. The inflation rate of 2% IS NOT attainable. Former BOJ chief Shirakawa had already predicted the same outcome with me before he was forced to resign by PM Abe.

2 ( +3 / -1 )

Yes, inflation and yen devaluation are solely designed to help pay of the massive debt.

3 ( +4 / -1 )

I am taking this damn horse to water and drowning it to make it drink. Yeah, that'll work said no one ever.

5 ( +5 / -0 )

I personally feel that I'm more likely to buy an abode now under an inflationary situation than a deflationary one.

Under inflation, I want to get a decent abode now while I can still afford it. It'll cost more a year from now to get the same abode.

Under deflation, I would put it off a year at least and then reconsider. If I bought the abode later I'd be able to get a better one or add some nicer furniture to it - but I wouldn't be able to do that if I had already bought the abode now.

0 ( +0 / -0 )

Inflation is great except when your salery is the same your have to pay more tax.

3 ( +4 / -1 )

Rich politicians and bureaucrats will NEVER get it. Nobody postpones a purchase because "it will be cheaper tomorrow". Ordinary people put off purchases because of INSECURITY, will I have a job tomorrow? That is why. But they will never get it.

0 ( +0 / -0 )

please don't increase prices, my salary is fixed for until my contract expires! I'm already struggling paying for my rent, groceries and necessities, not until you increase our salary too then inflation is a good thing. Increasing prices but keeping salary the same is just making us poor poorer!

3 ( +3 / -0 )

"Unless Japanese people see real progress in solving fundamental problems, such as lack of wage growth, a shrinking manufacturing base, and an unsustainable welfare system, many might prefer the problem they know to the one Kuroda hopes will replace it."

Above paragraph nails it.

Plus, don't forget Japan is lack of growth in popuation and inovation right now not to mention an increasingly greyed demographics in the backdrop. I don't think that a flux of flow of cheap money can really solve the fundamentals in long run.

Mr. Kuroda's policy may give some fireworks on the marketsin short term, but the downside is that it mayadd more debt burdens to younger generations.

-1 ( +2 / -3 )

geez these goons have NFI. I tell you for one thing id be damned if someone said to me that youd better spend your money quick as the prices are going to rise tomorrow. now if they said OK well give you an extra bonus each month but you must spend it on something, other than pachinko. yes sir give me more money to cover the tax hikes then ill spend. otherwise stick it where the sun dont shine

1 ( +1 / -0 )

Reuters seem to pick up quotes from the most pessimistic people and yet the national tax agency just reported a increase of personal income tax collected in the month of September. (9.3% increase)

1 ( +2 / -1 )

I don't think pying more for clothes or food is winning the 'battle' is it?

1 ( +1 / -0 )

nigelboy, I saw that news as well. Tax revenues 1 trillion higher than expected, was it? Although perhaps it could be "the rich" who are making all the extra income.

0 ( +0 / -0 )

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