Debate on Deflation in Japan #6

Comment on Katz' Rejoinder

Koichi MERA (University of Southern California, USA)

The main thrust of Mr. Katz' argument is in his third section, "The Politics of Anti-deflation," that LDP is using anti-deflation for its own political survival. In this sense, he has an excellent point.

However, his distinction of asset deflation and goods and services deflation is faulty. Just as much/little as the government can influence goods and services deflation, it can exert influence on asset deflation.

Second, asset deflation is a significant cause of decline in demand. As nobody knows where is the rock bottom price of goods and services, nobody knows where the rock bottom of land and buildings in Japan or anywhere in the world. The best PKO is to revitalize the economy. In this sense, I agree with Mr. Katz.