Takayuki Sumita
Director for EPA/FTA, METI
April 03, 2003
It is true that monetary factor is one aspect of deflation. But it is not the whole story of deflation. Demand and supply is also another aspect of deflation and inflation.
Our research indicates a simple but very serious cause (maybe one of several causes) of recent deflation in Japan.
We found a strongly positive correlation between the rate of change in price (GDP deflator) and the rate of change in population in Japan during 1960-2000, especially when these are compared as five-year average. This means that change in population which affects the total demand might be one of the factors which explains inflation and deflation.
As everyone knows, Japanese population will begin to decrease in several years and will continue to decrease almost forever. Therefore, this finding seems to be very serious for Japan.
This outcome implies that some measures other than monetary measures are also necessary for Japan to recover from deflation in a sustainable way, including some measures to reverse the tendency of having less and less children or more positive way to increase foreign people who spend a lot of money in Japan by giving them some incentives.
I believe that Miyakodayori is one of very important system for information exchange on substantial economic issues. And I have been appreciating your effort on this.
