Report
Why is there no inflation in Japan?
The United States, and even more so the euro zone, are now poised to conduct an expansionary fiscal policy and maintain the expansionary monetary policy. The concern is that this could lead to very high inflation. But in Japan, fiscal and monetary policies have been highly expansionary since the late 1990s, and yet there is no inflation (except in exceptional circumstances: sharp depreciation of the yen, VAT hikes). How is that possible? The lack of inflation in Japan despite the highly expansionary fiscal and monetary policies can be explained by: Wage restraint and the skewing of income distribution against wage earners due to small pay increases; The fact that fiscal deficits have not brought Japan out of its excess savings situation. There is wage restraint in the United States and the euro zone, but excess savings are found only in the euro zone.
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Natixis
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Patrick Artus
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