Private debt is deflationary as people prioritize paying it off, reducing the velocity of money that would otherwise be spent.
The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.
That's how Japan ended up the way it did.
Arguably it should have spent even more to offset deflation in the 90s.
The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.
That's how Japan ended up the way it did.
Arguably it should have spent even more to offset deflation in the 90s.