When Shizuma Tokifuji bought his Tokyo condominium in 1999, he thought he was buying close to the bottom of a real estate market that had lost two-thirds of its value since 1991. He was wrong.
The 56-year-old father of three sold his home last week for US$85,000 less than he had paid. Tokifuji is just one victim of an economic nightmare called deflation, a general drop in consumer prices that has contributed to Japan's three recessions since a property and stock market bubble burst in the early 1990s.
Four central bank governors in a decade have failed to halt falling prices, making it hard for companies to repay debt and contributing to the Nikkei 225 Stock Index's 77 percent plunge since 1989.
With prices starting to fall in the US and Germany, Federal Reserve chairman Alan Greenspan and European Central Bank president Wim Duisenberg will find few remedies in Japan.
"I don't see any quick fix that would kill this deflation monster," said Tokifuji, who retired after having a stroke. He sold his home to pay for his youngest son's college tuition.
Japanese are now looking to Bank of Japan Governor Toshihiko Fukui, who marks his first 100 days in office on Friday, to free the world's second-biggest economy from the yoke of deflation. Fukui has few options left.
Japan cut short-term interest rates to zero for the second time in March 2001 and has tripled monthly purchases of bonds from banks to ?1.2 trillion (US$10.2 billion) to drive down long-term interest rates.
"We at the Bank of Japan stand on the front line of the war against deflation," Fukui said this month. "However, we have used up the greatest weapon in a central bank's arsenal, that is interest rates, which have all declined to virtually zero in our short-term markets."
All that extra money hasn't helped the economy grow because banks, buckling under ?52.4 trillion in bad loans, haven't increased the amount of new lending in six years. Companies are focused on repaying debt to avoid bankruptcy.
The lesson for Greenspan and Duisenberg, who oversees 12 countries sharing the euro, including Germany, is to stop deflation before it starts.
Falling prices cut company sales, making it harder to repay debt, as consumers shelve spending plans with the expectation prices will keep dropping.
"The most important lesson from Japan is that when there is a risk of deflation, it's highly desirable to address it early," Anne Krueger, IMF deputy managing director, said in Tokyo this month. "Once it gets entrenched, it's much more difficult to get rid of."
US consumer prices in April fell for the first time since 2001 and the index was unchanged last month, tempered by a drop in energy prices.
While the core consumer price index -- excluding energy and food costs -- rose 0.3 percent, prices still aren't rising fast enough to eliminate the threat of deflation.
"Implicit in deflation is not what's happening to the current level of prices, but what markets expect about the future pattern of prices," Greenspan said by video link at the International Monetary Conference in Berlin this month.
While the Fed has battled inflation, it lacks experience in handling deflation, and seeks a "wider firebreak" to prevent it, Greenspan said.
"We know so little about it. We will lean over backward to make sure we contain deflationary forces," he said.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique