Economic Japanification: Not What You Think


  • Many economists assume that Japanification is the end-state of developed economies. However, the US has a lot of differences (better and worse).
  • A look at Japan's base money, broad money, corporate deleveraging, exchange rates, and other policies over the past thirty years.
  • Why Japan's 30 years of disinflation is quite different than what the US currently faces.
  • Looking for a helping hand in the market? Members of Stock Waves get exclusive ideas and guidance to navigate any climate. Get started today »

“Japanification” in the economic sense refers to the stagnation that Japan’s economy has faced over the past three decades, and is typically applied in reference to the concern among economists that other developed countries will follow along the same path.

As a visual, here’s Japan’s long-term nominal GDP in US dollar terms:

Japan GDP

Chart Source: Trading Economics

The chart is pretty similar in yen, too. It’s three decades of economic stagnation, any way you look at it.

However, there are a lot of misconceptions about what exactly Japan’s economic policies were during this period. There is a widespread narrative that Japan printed a ton of money and still ended up with deflation, which is not quite an accurate characterization.

In short, the process that the United States is beginning to go through in the 2020s is in most ways quite different than what Japan went through during the past few decades. This article compares and contrasts the process of Japanification with the United States as it pertains to the question of deflation or inflation going forward.

This article has several sections:

  • Japan’s Epic Bubble
  • Inside Japan’s Long Stagnation
  • US and Japan: Polar Opposites
  • Summary Thoughts

Japan’s Epic Bubble

Japan is a remarkably hard-working, homogenous, and efficient society, which led them to become an industrial powerhouse after they recovered from World War II.

In 1944, the US led other countries in putting together the Bretton Woods system, in which most currencies were pegged to the dollar, and the dollar was pegged to gold.

In 1971, however, the US defaulted on this system, rendering the dollar no longer redeemable for or fixed against gold. After that, all currencies rapidly fell vs gold, and along with oil embargoes, this played a role in a big commodity boom and period of high global inflation that persisted through the 1970s.

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This article was written by

Lyn Alden Schwartzer profile picture
Author of Stock Waves
High-probability investing where fundamentals and technicals align!
With a background that blends engineering and finance, I cover value investing with a global macro overlay. My focus is on long-term fundamental investing, primarily in equities but also in precious metals and other asset classes when appropriate.


My work can be found at,, and within the Seeking Alpha marketplace where I work with the Stock Waves team to blend their technical analysis with my fundamental analysis for high-probability long-term setups.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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