Sunday, April 04, 2010

Japan is in deflation?

I am not an economist, but in my readings, deflation is worse than inflation. According to the dictionary, deflation is characterized by declining prices caused by a reduction in money supply or credit. Deflation is also caused by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to economic depression.

Isn't it nice when people do not spend? Ergo, they are saving? Not really. When people do not spend, there is no cash that revolves around the country. There are no investments to speak of, therefore, there will be no jobs created, and no cash flow.

When I was new in Japan, I heard that they their economy is in bad condition. I thought then that if that were a bad economy, what about my home country, the Philippines? As I stayed longer, I slowly felt what they say that the Japanese economy going down. The scholars' monthly allowances were slashed annually, less educational trips, and all. I hope that Japan will soon recover as this global crisis is making many people's lives difficult. But if Japan and many other nations experience financial crisis, who become richer?

ADB president says Japan 'plagued by deflation'

The Japan Times, 1 Apr 2010

MANILA (Kyodo) Asian Development Bank President Haruhiko Kuroda has expressed concern about Japan's deflation at a time when other Asian economies are recovering ahead of the United States and Europe.

Haruhiko Kuroda

"The problem is that Japan alone is plagued by deflation, which leads people to defer consumption," Kuroda said in a recent interview before the ADB's annual general meeting in Uzbekistan in May.

He also said Japan should restore fiscal health in order to maintain social security for its rapidly aging population.

Kuroda, a former Japanese vice finance minister for international affairs, said Asian economies are likely to record higher economic growth in 2010 than in 2008.