During that period, Japan, once the world's second-largest economy accounting for roughly 10% of global GDP, experienced decline and the "Lost Thirty Years of Heisei-Era Deflation." Two major causes were:
1. Reckless Japanese monetary and fiscal policies, including so-called "quantitative easing" (2001–2006), microeconomic price destruction under the banner of "structural reform," and macroeconomic deflationary policies that produced chronic stagnation.
2. China's beggar-thy-neighbor export drive.
While Japan's monetary policy shifted toward genuine "unprecedented monetary easing" and its fiscal policy moved toward reflation under Abenomics beginning in 2013, China's domestic price levels gradually caught up with those of Japan and other advanced Western economies.
Consequently, when the supply shock triggered by the outbreak of the Ukraine War emerged in 2022, China's export engine could no longer function as the stabilizing safety valve for prices that it had once been.
On the contrary, China began compounding Japan's difficulties by exporting inflation into an economy that had not yet fully recovered from the "Lost Thirty Years of Heisei-Era Deflation" and remained dependent on a recession-favoring industrial structure led by manufacturers of inferior goods. The result was inflation amid stagnation—stagflation.
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During that period, Japan, once the world's second-largest economy accounting for roughly 10% of global GDP, experienced decline and the "Lost Thirty Years of Heisei-Era Deflation." Two major causes were:
1. Reckless Japanese monetary and fiscal policies, including so-called "quantitative easing" (2001–2006), microeconomic price destruction under the banner of "structural reform," and macroeconomic deflationary policies that produced chronic stagnation.
2. China's beggar-thy-neighbor export drive.
While Japan's monetary policy shifted toward genuine "unprecedented monetary easing" and its fiscal policy moved toward reflation under Abenomics beginning in 2013, China's domestic price levels gradually caught up with those of Japan and other advanced Western economies.
Consequently, when the supply shock triggered by the outbreak of the Ukraine War emerged in 2022, China's export engine could no longer function as the stabilizing safety valve for prices that it had once been.
On the contrary, China began compounding Japan's difficulties by exporting inflation into an economy that had not yet fully recovered from the "Lost Thirty Years of Heisei-Era Deflation" and remained dependent on a recession-favoring industrial structure led by manufacturers of inferior goods. The result was inflation amid stagnation—stagflation.