The general literature on deflation is that deflation is much much worse in the long run. In particular, borrowing becomes significantly more difficult and those who have loans are trapped with them, as their wages are pushed downwards by deflationary forces but the nominal loan remains the same.

While run-away inflation and run-away deflation are both awful, an economy which slowly inflates is better than one that slowly deflates.

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?pa...

http://www.businessweek.com/magazine/content/11_06/b42140145...

http://www.bis.org/publ/bppdf/bispap70c.pdf

http://www.kyotobank.co.jp/houjin/report/pdf/201305_02_e.pdf

http://www.nber.org/digest/jun05/w10938.html

Thanks for the links, but:

- Japan's GDP grew by 12% between 1990 and 2010, from 430 to 482 billion Yen (the NYT author incorrectly assimilates it to "an economy remaining the same size"?!)

- GDP per capita is 16% higher in Japan in 2010 than it was in 1990 [1]

- The NYT article gives absolutely zero other economic numbers, no objective evidence, nothing (it merely gives annecdotal evidence as in "so and so lost their house")

Why is this NYT article so bad and vague, when economic indicators I quoted above ARE actually (slightly) improving? I am not the only one to criticize it, see this response by the Center for Economic and Policy Research: http://www.cepr.net/index.php/blogs/beat-the-press/deflating...

[1] http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weor...