The trauma of deflation is too deep in the bones of central bankers, politicians and managers in Japan to risk a relapse. This economic bogeyman should never haunt Japan again. For around three decades, prices stagnated and wages fell slightly. A glass of beer cost the same before the corona pandemic as it had in the previous twenty years. But the Japanese didn’t earn any more, wages were frozen. Since the late 1990s, the central bank has made money extremely cheap and has continually come up with new incentives. Nevertheless, companies and consumers did not go into debt, preferring to put their money in cash into their futon mattresses.
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Those times seem to be over. Initially, the global price surge caused by pent-up demand from the pandemic period and the Russian war against Ukraine also caused prices to rise across the board in Japan, as the island nation is highly dependent on imported goods. Then the devaluation of the Japanese currency, the yen, by up to 30 percent, a result of low interest rates, drove import prices even higher. If inflation were to return to Japan permanently, it would be a historic, drastic change.