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"GDP growth averaged 1% during the 1990s, and headline CPI inflation averaged +1.2%. Perhaps contrary to popular presumption, deflation in Japan was never numerically serious: the sharpest fall in prices occurred in November 1999, when CPI fell by only 1.2%. This is much milder than the 10% a year decline in inflation in the US during the Great Depression.
Further, it should be noted that Japan’s demographic trends are much weaker than in the US, which means that to replicate the experience of Japan in per capita income terms, GDP growth in the US would need to be 2% for an extended period of time. A ‘repeat of Japan’, in terms of GDP growth and CPI, may not be as outrageous a claim as some may believe. Investors may want to keep this historical fact in mind when they consider policy actions the US may take and how the USD might be affected."
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