While inflation has reached new record highs here and the ECB is now raising interest rates significantly, the exact opposite is the case in Japan. Here, prices rose by only 2.4 percent in June and the central bank just decided to leave the key interest rate at -0.1 percent.

To us, 2.4 percent inflation sounds like a boon from a bygone era, but in Japan such figures make the headlines. Prices haven’t risen that much in around seven years. Even the clothing giant Uniqlo, with its 812 stores in the country so far a symbol of price stability, has now announced price increases for the autumn and winter collection.

Meanwhile, politicians are discussing how to make life easier for people in the face of skyrocketing prices in Japan. A temporary reduction in VAT is also being discussed, as is a one-time inflation subsidy of the equivalent of 704 euros for the Japanese who are particularly affected. As a reminder: when inflation in Germany was still 2.4 percent, we discussed which corona vaccination was the best.

The Japanese are also adapting to the unfamiliar situation. As early as May, when inflation was still slightly lower, they reported to the Reuters news agency that they rarely opened the refrigerator to save electricity and were always on the lookout for special offers and second-hand clothing. This also applies to the Japanese, who could easily afford the only slightly higher prices.

Because the Japanese are not used to inflation rates of more than two percent. The values ​​have only risen above this mark twice since the turn of the millennium. Once during the financial crisis in 2008 and once in 2014. In between they were often even in the negative range and rarely more than one percent.

The curve has a system in Japan. For around 30 years, governments have been meticulously ensuring that prices in the country remain stable. This policy became famous with the recently assassinated former Prime Minister Shinzo Abe. It’s named “Abenomics” after him, but it basically started in the 1990s.

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Extensive state aid is one of the most important instruments for price stability. The rice farmers in the country, for example, now get up to 40 percent of their income from the state so that they don’t have to raise prices for the population. Wheat, rapeseed and soya are also subsidised, and there are generous purchase premiums for the car industry. Breweries and spirits producers receive grants for the development of new products, and in winter rising energy prices were compensated for with 600 million euros for refineries and oil importers.

Price stability therefore comes at an enormous price. Japan is the most indebted country in the world. An estimated 12.2 trillion euros of misery is weighing on the Asian state, and the debt ratio, at 266 percent of gross domestic product, is the world’s lone leader.

And the citizens also pay for the low inflation. In Germany, for example, where the state controls inflation less strictly, this results in an interplay between wages and prices. If the latter increase, unions demand higher wages. This then increases the costs for companies again, they raise their prices, then wages are increased again and so on. In moderation, this has been a very healthy spiral for decades.

In Japan there is no such spiral. Because prices never rise here, wages also remain low. Adjusted for inflation, the wage level has even fallen by 12 percent since 1998. The trade unions are losing members, only 63 percent of the Japanese are organized. If the Japanese government were to stop its pricing policy, most would simply not be able to afford the rising prices.

The inflation rate in Germany is higher than it has been for 40 years. FOCUS Online therefore asks: your everyday life consists only of savings? You really have to spend every penny and are constantly looking for ways to make a living cheaper? We want to tell your story. Please write to us at mein-bericht@focus.de. Please briefly describe your situation to us in an e-mail and also tell us when we could contact you by phone in the next few days. Thanks very much!

This does not play a major role for domestic consumption. If the prices remain stable, you can still afford the same goods with the same wages. Internationally, however, the Japanese are becoming poorer and poorer. The Japanese yen has fallen 45 percent against the US dollar since 2011 and is down 30 percent against the euro. Travel abroad and imports are becoming more and more expensive, and the government has to subsidize more and more.

In order to finance the high debt, the Bank of Japan, as the central bank, is keeping interest rates in negative territory, as it confirmed again this week. It is also buying up most of the Japanese government bonds used to finance the debt. It now holds 123 percent of Japan’s GDP in its total assets. For comparison: the ECB only gets 58 percent after all its bond purchase programs, the US Fed 34 percent.

The example of Japan shows that persistently low inflation comes at a high price. It would still be nice if we went back to 2.4 percent.

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