HYPOTHESIS FORMATION AND FUNDAMENTAL EMPRICAL ANALYSIS ON THE ECONOMIC, SOCIAL, AND POLITICAL IMPACTS OF DEFLATION

Abstract

In Japan, GDP and other indicators have been deteriorating due to low inflation for a long time. However, the deterioration of social and political indicators that accompanies such deterioration is rarely mentioned. In addition, it is conceivable that this underestimation could be the reason for the small scale of the deflationary measures. In this study, we define the phenomenon of deflation as a chain of economic, social, and political deterioration caused by persistent low inflation. The objective is to reveal the multifaceted nature of the phenomenon of deflation and the horror of its cascading nature. Then we theoretically organized the phenomenon of deflation. As a result, we recognize the following theoretical overview of the phenomenon of deflation. “The deflationary trend accompanying fiscal austerity leads to an increase in poverty inequality. The increase in poverty inequality leads to a decline in the public nature of the nation, and the decline in the public nature of the nation leads to political corruption. Deflationary trend also increases social problems such as the concentration of people in one area. This leads to a chain reaction of declines in the amount of happiness among the people.” While forming hypotheses about the overall picture of the deflation phenomenon, we conducted basic verifications, and some of these were statistically supported.