Deflation hasn’t done Japan any good. And they’ve had a major 20 year dose.
But when the bubble burst, and the stock market benchmark index, the Nikkei 225, shrank from 39,000 to 9,000 in the 1990s, prices didn't fall accordingly. Many landlords, farmers, and suppliers stubbornly held their prices firm, believing consumer demand would recover - which it never did.Today, even amid Japan's worst downturn since the war, minshuku owners still expect a family of four to pay 12,000 yen, despite 25 years of wear and chronic vacancy as city-folk stay home instead of taking weekend breaks.
http://www.atimes.com/atimes/Japan/LD07Dh01.html In japan you had massive inflation in the 80's due to monetary policy and economic growth. In the 90's the bubble burst. You had deflation of assets and wages yet prices remained firm in most of the economy (sound familar?) It is only in the last year so after the government has pumped money into their economy for a decade to keep prices stable has deflation of prices started in earnest. Wages are still going down as companies try to retain profits margins. the governmental intervention of Japan's economy over the last decade or so is the cause of Japan's problems.If government wishes to alleviate, rather than aggravate, a depression, its only course is laissez-faire—to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch. Any propping up of shaky positions postpones liquidation and aggravates unsound conditions http://mises.org/daily/1099 by leaving an economy alone you allow prices to find the point where demand matches supply. what Japan shows is that deflation will come no matter what you do. By Japan spending trillions of Yen in wasted governmental policies they postponed defaltion for a decade and made the final deflationary event steeper and harder than was needed. trying to avoid deflation prolongs recessions and leads directly into decade longs depressions.