Shuhei Wada
Are you interested in economics?
I am majoring economics in this university. As I learn more about the economics, I get more interested in the economics.
Today, I would like you to know about the deflation in economic. Many people say that deflation is good because everything become cheaper in addition, there are no countries collapsed by deflation.
Decreasing of price of products seems good for consumers. However, this means profit for producers will also decrease.
In the economic rule, when supply is higher than demand, the price of product will decrease. Let’s say, you are abandoned at the center of barren dessert. You really want something to drink. However, you cannot find anything to drink there. If you find the merchant selling water, you might pay 100$ for a cup of water. In contrast, let’s say you are floating on the huge lake. Do you pay 100$ for a cup of water? I guess you won’t pay 100$ for a cup of water since the supply of water is exceeding the demand of water.
Are you interested in economics?
I am majoring economics in this university. As I learn more about the economics, I get more interested in the economics.
Today, I would like you to know about the deflation in economic. Many people say that deflation is good because everything become cheaper in addition, there are no countries collapsed by deflation.
Decreasing of price of products seems good for consumers. However, this means profit for producers will also decrease.
In the economic rule, when supply is higher than demand, the price of product will decrease. Let’s say, you are abandoned at the center of barren dessert. You really want something to drink. However, you cannot find anything to drink there. If you find the merchant selling water, you might pay 100$ for a cup of water. In contrast, let’s say you are floating on the huge lake. Do you pay 100$ for a cup of water? I guess you won’t pay 100$ for a cup of water since the supply of water is exceeding the demand of water.
This picture is the data of deflation in Japan.
As you can see Japanese economic is in deflation from 1999s.
you can see more detailed data in Cabinet office Japanese Government
Here is the most troublesome thing. It is the spiral in deflation.
People will have fewer income in the time of deflation. It is the problem.
When people get less income, they will think "We need to deposit money for the future" People will feel anxious about the future, then they will bank more money.
At the same time, people will spend less money for their life. They put saving money on higher priority.
And this means demand for the people will decrease. Company will not invest if there is no demand of the products. Company will get less income because less people will buy products, then employees get less wage. And it will continue like a spiral.
Here is the video of Aso Taro who is graduated Gakushuin University.
Good evening Shuhei. Thank you for your informative blog. I could learn about the process of being in deflation and how serious it is. I would like to know more about the solution for increasing economy in Japan. However, the situation will get worse and worse. As you know, the Japanese government will try to increase the age of the people who can get the pension to 68 or 70. Therefore, the bad economy situation will surely give big damage to elder people. Anyway, I enjoyed reading your blog, thank you.
ReplyDeleteKazu Hatakeyama
Hello, Shuhei.
ReplyDeleteTo be frank, I'm not so interested in economics. Actually, I never even tried to learn it.
BUT! your way of explaining the situation we have in Japan now, and the mechanism of the supply, demand and price was very easy to understand, so I could learn a lot from your blog. Thank you!
I'd be happy if you could tell us more about what you find interesting about economics later in class or another time in your blog.
Asumi Oda
Hi Shuhei,
ReplyDeleteThanks for your informative blog. Now I totally understand what spiral deflation. How can this be solved?
And please summarize the contents of the Aso video - why did you include it here?
Ms. MacGregor