Corporate profits have tripled and shareholder dividends have increased ninefold, while wages have remained flat. This article examines the data behind the argument that this imbalance caused Japan’s economy to stagnate for 30 years.
From the late 1990s through 2022, deflation was widely discussed as a major problem. However, the rate of price decline was small, at less than 1%, and has been described as qualitatively different from the decline during the Great Depression in the interwar period. On this basis, the author proposes revisiting simple explanations centered on deflation. The article argues that minor deflation and deflation as a circumstance specific to Japan should be considered separately.
It also discusses the debate over explanations that took the place of deflation, including arguments that the Bank of Japan's monetary policy was misguided and the claims of reflationists. It describes how governments and academia debated whether a policy shift alone could bring an end to deflation and stagnation. Based on the data, the article examines the view that the contradiction between expanding corporate profits and stagnant labor costs has constrained Japan's overall growth potential.
The article emphasizes that corporate profits and shareholder dividends have increased substantially, while labor costs and capital investment have remained flat and real wage growth has been limited. It argues that determining the existence and extent of minor deflation and its effects is key to deepening our understanding of Japan's lost 30 years. By testing multiple theories about the relationship between wages and prices against the data, the author presents a multifaceted account of the factors behind the decline in Japan's economic growth potential.