Price Cuts Boosts Japanese Economy

The Australian has an article blaming Japanese price deflation on housewifes seeking out bargains using new technology, something which pressures stores to reduce prices as this means that competition is tougher. The article describes the increased bargain awareness this has created as "catastrophic".

But this is bad only if you view deflation as something bad in itself. Remember, these housewifes and other Japanese (and other non-Japanese for that matter) have a limited budget. If they can find bargains that means that they'll be able to afford more of these things-and even more of other things.

Tougher competition because of increased bargain awareness by consumers thus in effect represent a positive supply shock, with lower prices and higher volumes. Thus, while it will "increase deflation", it will also raise real output. Only in the twisted worldview of deflationphobes is that "catastrophic".