Is that really inflation or is that economic growth?
I thought inflation was considered to be an increase in prices that isn’t due to real growth in the economy - or in other words a devaluation of the currency.
Westerners are confused by Japan largely because they don’t take into account 2 things - a shrinking population and an appreciating currency.
In terms of per capita GDP growth and especially per working age population GDP growth, Japan has grown faster than either Europe or the US in the last 10 years.
The Japanese yen has also appreciated tremendously in the last decade or so, as a sort of structural re-balancing of past policies that undervalued the currency to favour exporters at the expense of domestic consumption. That is now reversed.
Right wing American economists always try to paint the Japanese economy, which has a rather large amount of state intervention and socialist policies, in a negative light in order to forward their own domestic agendas. It isn’t nearly as bad as westerners think it is.
State economic intervention in Japan has been a mater of industrial policy, not social spending. Japan’s public spending on its elderly has always been comparatively meager, which is part of the reason that the country has historically had such a high private savings rate, and why that rate has fallen so much in recent years.
Like nearly all developed countries, Japan’s borrowing amounts to financing the current population’s needs and wants with the output of future workers. But the Japanese are uniquely stressed in this regard because they have more debt and fewer projected future workers than most other countries. And both the shrinking population and the appreciating currency make this situation harder.
I don’t mean to overstate this. Japan is a rich country, and its citizens are quite comfortable. But the sustainability of that situation is reasonably open to question.
Right, so eventually they are forced to open the flood gates to immigration and the problem is solved. There is plenty of young workers in other parts of Asia that would love to come and work in Japan if they could.
It would be a miracle of miracles if you could reliably obtain growth without inflation. Consider a simplified story: inflation is more money chasing the same goods and services, or the same money chasing fewer goods and services.
Suppose a bank makes a loan. Now, people take out loans to do something—say, start a business, buy a car, get an education. Some of these will succeed. Then the money supply grew (the loan which was paid off) but so did the goods and services (the activity the loan supported). But ventures like this are inherently risky, so some loans will fail. In these cases there is more money (the loan which wasn’t paid off but the money is still floating around) but the same goods and services. So the very fact that the economy is growing means people are taking/making loans and some of these will fail. Failure means more money chasing the same ol’ goods and services.
Definitely simplified on a zillion points but I hope it adds some substance.