Economics
Japan’s Long Deflation Battle Is Warning for Post-Virus World
- Cycle of falling prices, feeble growth difficult to escape
- Virus shock could tip economies from disinflation to deflation
Customers shop at a drugstore in Tokyo, Japan on March 26.
Photographer: Kiyoshi Ota/BloombergThis article is for subscribers only.
The Covid-19 shock could spur an acceleration in global inflation driven by massive monetary and fiscal stimulus or a spell of deflation as demand craters. Japan’s experience suggests the latter is the bigger risk.
Years of anemic prices after the bursting of an asset bubble in Japan at the beginning of the 1990s prepared the ground for a deflationary tumble late in that decade. The bad news for Japan, and possibly the precedent for others, is that the world’s third-biggest economy is still struggling to get prices rising again.