Japan’s Debt Sustains a Deflationary Depression
Markets have reacted dramatically to the Bank of Japan’s recent efforts to stimulate the economy with loans to high-growth sectors; an expansion of its asset-purchase program; and a new 1 percent inflation target to combat chronic deflation.
Japanese stocks, especially of major exporters, soared and the yen tanked, starting in early February. Yet the spurring effects of monetary easing on Japanese stocks and the depressing influence on the yen didn’t last long. Since mid-March, the currency has resumed its role as a haven from euro-area turmoil. The “risk off” trade is back in favor. Still, I continue to believe that fundamental changes are occurring in Japan that will weaken the yen considerably in future years. ….
Despite aggressive monetary policy since the early 1990s, Japan has suffered bouts of deflation. The two decades of economic stagnation were compounded by the huge earthquake and devastating tsunami last year. The economic disruptions and loss of nuclear-power generation remain considerable. Rebuilding will create jobs and economic activity, but it will simply take things back to where they were, and at tremendous cost to the government, insurers and those who lost property, income and jobs, to say nothing of the thousands of lost lives.
https://www.bloomberg.com/news/2012-06-04/japan-s-debt-sustains-a-deflationary-depression.html