Online Registration

ISO 9001:2015

INTERNATIONAL JOURNAL OF ADVANCED RESEARCH IN COMMERCE, MANAGEMENT & SOCIAL SCIENCE (IJARCMSS) [ Vol. 9 | No. 2 (IV) | April - June, 2026 ]

Deflation – A Perspective of Japan

Dr. Rajeswari Mahankali

Governments generally refer to inflation as one of the most preferred economic indicators to assess the   functioning of the economy. Governments generally fix a desirable level of inflation. Inflation may be either low or high or moderate. Inflation that is little higher or little lower than the desirable rate of inflation may not be a problem to the economy, but too high or too low an inflation is a problem to the economy. High to very high inflation or low to very low inflation are not desirable and   necessitates government intervention to bring it to the desired level. High to very high inflation is hyperinflation and low to negative inflation   is deflation. While the government often focuses on inflation, economists consider deflation, a sustained drop in general price levels, to be more dangerous and harder to fix. Deflation is rare because central banks work aggressively and proactively to prevent it from starting. Unlike inflation, deflation once started may turn into a deflationary spiral and become very hard to contain. This can be better understood by looking into Japanese Deflation that shook the Japanese Economy for 30 years starting from 1990s to 2020s, the Lost Decades1. Japan could reverse deflation not because of its own policies, though its policies were highly effective, but because of external factors, the Covid 19 Pandemic and Russia, Ukraine war that triggered inflation globally. As of early 2022, Japan is emerging from nearly three decades of chronic deflation, marking a historic shift toward inflation. This article analyses the factors that have driven Japan into deflation. What are the outcomes of deflation? What measures were taken by Japan to reverse deflation? Did they work? How did Japan come out of deflation?

  1. Clay Halton, (2026, April 23), Understanding Japan's Lost Decade: Key Factors and Lessons, Investopedia. Retrieved From: https://www.investopedia.com/terms/l/lost-decade.asp.
  2. The Investopedia Team, (2026, April 24), Understanding Deflation: Causes, Effects, and Economic Insights. Retrieved From: https://www.investopedia.com/terms/d/deflation.asp
  3. https://en.wikipedia.org/wiki/Economy_of_Japan.
  4. Justin Mc Curry, (2019, December 28), How Japan has fared in 30 years since the stock market bubble burst, The Guardian. Retrieved From:

https://www.theguardian.com/world/2019/dec/28/how-japan-has-fared-in-30-years-since-the-stock-market-bubble-burst.

  1. (2003, March 11), Nikkei closes at new 20-year low. Retrieved From: https://edition.cnn.com/2003/BUSINESS/asia/03/11/asiastox.tuesclose/
  2. Brian Bremner, (2002, February 11) ‘Deflation Is the Real Danger’, Business Week, p.54.
  3. Avinash Celestine, (2002, March 4) ‘Deflation Danger, Business World, p.30-31.
  4. Naruki Mori, Shigenori Shiratsuka, and Hiroo Taguchi, (2001, February), Policy Responses to the Post-Bubble Adjustments in Japan: A Tentative Review, MONETARY AND ECONOMIC STUDIES (SPECIAL EDITION). Retrieved From:

https://www.imes.boj.or.jp/research/papers/english/me19-s1-5.pdf

  1. Clay Halton, (2026, April 2023), Understanding Japan's Lost Decade: Key Factors and Lessons. Retrieved From: https://www.investopedia.com/terms/l/lost-decade.asp
  2. (2024, June 25), Japan’s Transformation in Focus. https://www.morganstanley.com/ideas/japan-economic-outlook-2024-end-of-deflation
  3. (2009, October 02), Japan's jobless rate dips to 5.5% in August. Retrieved From: https://japantoday.com/category/business/japans-jobless-rate-dips-to-55-in-august.
  4. Pablo Agnese, Hector Sala, (2008, September 02), Unemployment in Japan: A look at the ‘lost decade’. Retrieved From: https://mpra.ub.uni-muenchen.de/14332/1/MPRA_ paper_14332.pdf.
  5. Kyoji Fukao, (2010), The Structural Causes of Japan's "Two Lost Decades”, RIETI, Research Digest. Retrieved From: https://www.rieti.go.jp/en/about/Highlight_32/chap6.pdf
  6. Jeffrey Frankel, (December 2015), THE PLAZA ACCORD, 30 YEARS LATER, NBER WORKING PAPER SERIES, Working Paper 21813, NATIONAL BUREAU OF ECONOMIC RESEARCH, 1050 Massachusetts Avenue, Cambridge, MA 02138. Retrieved From: http://www.nber.org/papers/w21813.
  7. International Monetary Fund, (2011, April), Retrieved From:   https://www.imf.org/-/media/websites/imf/imported-flagship-issues/external/pubs/ft/weo/2011/01/c1/_box14pdf.pdf.
  8. Kunio Okina, Masaaki Shirakawa, and Shigenori Shiratsuka, (2001, February), The Asset Price Bubble and Monetary Policy: Japan’s Experience in the Late 1980s and the Lessons, MONETARY AND ECONOMIC STUDIES (SPECIAL EDITION)/FEBRUARY 2001 Retrieved From: https://www.imes.boj.or.jp/research/papers/english/me19-s1-14.pdf.
  9. Brian Bremner, (2002, March 18) Deflation Disaster’, Business Week, p, 22-23.
  10. Brian Bremner, (2002, February 11) ‘Deflation Is the Real Danger’, Business Week, p. 54.
  11. Bill Powell, (2001, May 7), Asia’s Latest Export: Deflation’, Fortune, p. 48-51.
  12. Johan Brooks, (2026, July 30), Japanese population falls below 120 million for first time in decades, The Japan Times, AFP-JIJI, JIJI. Retrieved From:  https://www.japantimes.co.jp/news/2026/07/30/japan/society/japan-population-fall/
  13. (2011, June 06), The Japanese earthquake and tsunami, BIS Quarterly Review, Retrieved From: https://www.bis.org/publ/qtrpdf/r_qt1106u.html.
  14. Op Cited. Avinash Celestine.
  15. BBVA Research (2015) Risk of deflationary spiral and monetary policy, Global Economic Outlook. Retrieved From: https://www.bbvaresearch.com/wp-content/uploads/2015/02/Global_ Economic_Outlook_1Q15-Cap4.pdf
  16. Op Cited. Brian Bremner, (2002, March 18) ‘Deflation Disaster’.
  17. Op Cited. Brian Bremner, (2002, March 18) ‘Deflation Disaster’.
  18. Op Cited. Brian Bremner, (2002, March 18) ‘Deflation Disaster’.
  19. Op Cited. Brian Bremner, (2002, February 11) ‘Deflation Is the Real Danger’.
  20. WillemThorbecke, (2019, December),  Why Japan lost its comparative advantage in producing electronic parts and components, Journal of the Japanese and International Economies, Volume 54, December 2019, 101050, Science Direct. Retrieved From: https://www.sciencedirect.com/ science/article/abs/pii/S0889158319300413.
  21. Willem Thorbecke, Why Japan lost its comparative advantage in producing electronic parts and components,
    RIETI, Retrieved From: https://www.rieti.go.jp/en/columns/v01_0127.html.
  22. Maria Peñascal, (2025, January 23), Death in Japan: Spirituality and Culture. Retrieved From: https://voyapon.com/death-in-japan-spirituality-culture/
  23. Byjakeadelstein, (2012, Sep 12), Killing Yourself To Make A Living: In Japan Financial Incentives Reward “Suicide”. Retrieved From:https://www.japansubculture.com/killing-yourself-to-make-a-living-in-japan-financial-social-incentives-keep-suicide-rates-high/
  24. Yukiko Tanisho, (2013, October), Economic Distress and Suicide in Japan, Health and Global Policy Institute. Retrieved From: https://hgpi.org/wp-content/uploads/Suicide%20Issue% 20HGPI%20English%20v2.pdf
  25. (January, 2013), Outline of Monetary Policy, Price Stability Target, Bank of Japan. Retrieved From: https://www.boj.or.jp/en/mopo/outline/target.htm.
  26. Melissa Cheok, (2016, July 2015), Krugman Calls For Higher Inflation Target, Fiscal Boost, Bloomberg. Retrieved From: https://www.bloomberg.com/news/articles/2016-07-15/krugman-calls-for-higher-japan-inflation-target-fiscal-boost  Melissa Cheok July 15, 2016.
  27. TOSHIKI JINUSHI, YOSHIHIRO KUROKI, and RYUZO MIYA, Monetary Policy in Japan Since the Late 1980s: Delayed Policy Actions and Some Explanations, Institute for International Economics. Retrieved From: https://www.piie.com/publications/chapters_preview/319/ 6iie289X.pdf
  28. Mr. Niklas J Westelius, (2020, November 08), Twenty Years of Unconventional Monetary Policies: Lessons and Way Forward for the Bank of Japan, IMF eLIBRARY. Retrieved From: https://www.elibrary.imf.org/view/journals/001/2020/226/article-A001-en.xml.
  29. Ibid.
  30. Ibid
  31. Ibid
  32. Ibid
  33. Ibid
  34. Ibid
  35. Ibid
  36. International Monetary Fund. Asia and Pacific Department, (2009, May 05), Revisiting Japan’s Lost Decade, IMF eLIBRARY. Retrieved From:. https://www.elibrary.imf.org/display/book/ 9781589068407/ch04.xml.
  37. Ibid.
  38. Ibid.
  39. Ibid.
  40. Ibid.
  41. John H. Makin (1996 December 01), Japan’s Disastrous Keynesian Experiment American Enterprise Institute, Retrieved From:https://www.aei.org/research-products/report/japans-disastrous-keynesian-experiment/
  42. (2018, March 23), Abenomics and the Japanese Economy, Council on Foreign Relations. Retrieved From: https://www.cfr.org/backgrounders/abenomics-and-japanese-economy.
  43. Ibid.
  44. Ibid
  45. Ibid.
  46. International Banker, December 23, 2020, Was Abenomics Successful in Achieving Its Aims?  Retrieved From:https://internationalbanker.com/finance/was-abenomics-successful-in-achieving-its-aims/
  47. Ibid.
  48. Ibid
  49. Daniel O. Beltran, Julio L. Oritz, (2025, September 19), Inflation’s Shared DNA: Regional and Global Factors in Post Pandemic Core Inflation, FEDS Notes. Retrieved From: https://www.bls.gov/opub/mlr/2023/beyond-bls/what-caused-the-high-inflation-during-the-covid-19-period.htm
  50. QNB, (2025, 10 Apr), Has Japan escaped from its long-standing “deflationary trap”? Retrieved From: https://www.qnb.com.eg/sites/qnb/qnbglobal/en/eneconomics7apr2025newsHas Japan escaped from its long-standing “deflationary trap”?
  51. Dylan Butts, Clement Tan (2024, March 14), Japan’s workers are set for big pay increases after ‘shunto’ negotiations. This is why it matters, CNBC. Retrieved From: https://www.cnbc.com/ 2024/03/14/japan-2024-shunto-spring-wage-negotiations.html
  52. Junyu Tan, Coface economist, Japan at the crossroads: Will it escape the deflationary trap? North Asia. Retrieved From: https://www.coface.com/news-economy-and-insights/japan-at-the-crossroads-will-it-escape-the-deflationary-trap.
  53. Japan Inflation, (July 2026), Focus Economics. Retrieved From: https://www.focus-economics.com/country-indicator/japan/inflation/.

DOI:

Article DOI:

DOI URL:

Download Full Paper:

Download