Kuroda's Bazooka: Japan's Decade-Long War on Deflation
Japan faces a unique economic puzzle. While peers like Germany chase per capita GDP supremacy and South Korea threatens to overtake, Japan battles to hold its rank as the world's third-largest economy. Alone among major economies, it has doubled down on fighting deflation as others wage war on inflation. This struggle traces back to the early 1990s asset bubble burst, which sparked a banking crisis, corporate deleveraging, and household caution. Deflation took root, worsened by the 1997 Asian Financial Crisis. Over two "lost decades," weak demand entrenched a price-fall expectation, stifling wages and investment. The 2008 Global Financial Crisis and 2011 earthquake added blows, shrinking nominal GDP over 6 percent from 1997 to 2013 amid soaring public debt. Japan seemed destined for decline. Enter Shinzo Abe's 2012 revival plan, Abenomics, with three arrows: bold monetary easing, flexible fiscal policy, and structural reforms. The first arrow fell to new Bank of Japan...