The Pigou Effect and Japan
If the Pigou effect always operates strongly, the Bank of Japan's policy of near-zero nominal interest rates might have been expected to end the Japanese deflation sooner.
Other apparent evidence against the Pigou effect from Japan may be its long period of stagnating consumer expenditure whilst prices were falling. Pigou hypothesised that falling prices would make consumers feel richer (and increase spending) but Japanese consumers tended to report that they preferred to delay purchases, expecting that prices would fall further. A similar, reverse Pigou effect happens throughout the world in consumer electronics because of depreciating prices (this is sometimes called the Osbourne effect).
Read more about this topic: Pigou Effect
Famous quotes containing the words effect and/or japan:
“Reckoned physiologically, everything ugly weakens and afflicts man. It recalls decay, danger, impotence; he actually suffers a loss of energy in its presence. The effect of the ugly can be measured with a dynamometer. Whenever man feels in any way depressed, he senses the proximity of something “ugly.” His feeling of power, his will to power, his courage, his pride—they decline with the ugly, they increase with the beautiful.”
—Friedrich Nietzsche (1844–1900)
“I do not know that the United States can save civilization but at least by our example we can make people think and give them the opportunity of saving themselves. The trouble is that the people of Germany, Italy and Japan are not given the privilege of thinking.”
—Franklin D. Roosevelt (1882–1945)