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And could this help explain Japan's persistent deflation problem?These questions preoccupy Kosuke Motani, author of "The Real Face of Deflation".
With the largest amount of debt relative to the size of its economy among the rich countries, and a stubborn deflation problem to boot, Japan has an economic time-bomb ticking beneath it.
The last time Beijing tried such aggressive measures to slow the economy was in 1993 and 1994, when China faced double-digit inflation and responded so decisively that within three years it had a deflation problem instead and suffered a sharp slowdown in economic growth along the way.
"I'd be very surprised if Japan didn't have a deflation problem," says Franklin Allen, professor of finance and economics at Wharton.
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Boston Scientific said it had received no complaints about deflation problems with the stents made after it changed its manufacturing process.
After receiving reports of 3 deaths and 43 injuries because of deflation problems, the company on July 16 recalled nearly 100,000 stents.
All three face deflation problems, ie they have, or may have, difficulty in achieving a sufficiently low real interest rate.' Krugman pointed out that the US had its own equivalent of the restrictive European Stability Pact, because of the legal obligation for the US state and local governments to have balanced budgets (thus offsetting the supposed stimulus from Washington).
But there is a corrective to the inflation-deflation problem that should benefit all parties going forward.
It's basically an assertion that we're doing all right, maybe could do a bit better, but not worth endangering the Fed's reputation — oh, and as long as we don't have actual deflation, no problem.
Start with whether deflation is a problem.
In fact, Europe is facing the opposite problem: deflation.
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