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Deflation and the Mechanism of Corporate Behavior

  • Kenji AramakiEmail author
Chapter

Abstract

In Chap.  5, we examined the causes of deflation mainly from the viewpoints concerning the appropriateness of the monetary policy. So far, however, we cannot say that we have found a convincing explanation for the causes of long stagnation and deflation after the burst of the bubble, including the continuation of such a situation after the excesses of the corporate sector had been removed. We have been arguing that the fundamental problem was in the corporate sector. So, in this chapter, we examine company behaviors that lay behind the macroeconomic developments, through the analysis of financial statements of companies. As we have seen, under the long stagnation, particularly after the financial crisis, fundamental changes took place in the Japanese economy, including a sharp increase in unemployment rate, a rapid decline in regular employment and a shift to non-regular work, a fall in nominal wage, a switch of the corporate sector from an excess investment to an excess savings position, and a mild but chronic fall in the Consumer Price Index (CPI) (deflation). Almost all of the changes (employment, wages, pricing, and investment) are related to company behaviors. So, in order to understand the mechanism of these phenomena, or the cause of the stagnation and deflation, we need to see what happened to companies.

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.Tokyo Woman’s Christian UniversityTokyoJapan
  2. 2.University of TokyoTokyoJapan

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