Eli5: Why is the Japanese economy such an anomaly?

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I’ve heard the quote attributed to Simon Kuznets
“There are four kinds of countries in the world: developed countries, undeveloped countries, Japan and Argentina”. I’m able to understanding the piece about Argentina and why Argentina has always seemed to suffer from hyperinflation but…

I don’t understand the Japanese economy. Why is inflation so consistently low and almost deflationary? What about the Japanese economy makes it an outlier?

In: Economics

2 Answers

Anonymous 0 Comments

Question is best answered [here](https://www.reddit.com/r/explainlikeimfive/s/VlK4liwPuQ).

Essentially, the Japanese are very risk-adverse and would rather slowly accumulate (save) money through stable means than take risks by doing stuff like investing in the stock market, taking out unnecessary loans, or spending money on “wants” in general. Inflation is largely driven by supply and demand, so without the demand from consumers, it stays pretty low. IIRC, it got to the point where the central bank had to literally take money from people’s accounts to artificially bump-up inflation to a healthier rate.

Anonymous 0 Comments

Not an economist, but my understanding is that the Japanese savings rate is insane. This keeps inflation low, sometimes no matter what the central bank does, because inflation requires spending. If I remember correctly, even when the effective interest rate was negative, Japanese people still saved.