|How can Japan overcome deflation ?|
[Photo] Sento Imperial Palace In Kyoto
I delivered a discussion on the Japanese economy during an intensive Diet deliberation for the budget committee on February 23 broadcasted on NHK, which has taken a growing interest in the NEW KOMEITO's economic policy. I would like to introduce the summary of my session.
Japan has been suffering from deflation since 1996.
First of all, developing countries like China and Korea have exported a lot of industrial products to Japan over the last 20 years, and as a result, prices for goods such as televisions and personal computers have fallen to half the price they were of 20 years ago.
Second, a short term interest rate in Japan has been near zero since 1998, since Japan had to overcome a subsequent recession after the collapse of the bubble economy in 1991 and the financial crisis in 1998.
For this reason, the BOJ has continued the zero interest rate policy.
This economic situation is defined as "the trap of liquidity" by professor J. M. Keynes.
However, child allowance is the wrong policy as a measure against deflation, because people who receive it tend not to spend but to save.