Domestic demand in Japan...

Inflation increases when wages and income and demand increase after full-employment which constrains domestic supply... And, when demand outstrips supply it is controlled by raising interest-rates... But, in Japan inflation is down... Full-employment shows that demand is not a problem... Then we might expect supply to be responsible for low prices... But, lower prices may not be sufficient to attract demand... money-supply is important to increase wages and demand... actually, real-wages and income... Japan's low real wages are a major reason for low demand... Actually, it has cut wages to make the economy competitive... But, domestic competitiveness, lower prices has been neglected by adopting inflation targeting... People in Japan might think that inflation would go up so they save more for future... Nonetheless, if people expect that prices would go down they might save less today... Nevertheless, economists argue that lower prices or deflation would delay spending, but lower prices are an opportunity to buy soon and not delay because supply is limited... Therefore, deflation is an opportunity to buy now and not delay... If policy-makers commit deflation instead of inflation people might save less and spend more... Deflation would increase real-wages... Increasing money-supply may not be important... Real wages might go up without increase in money-supply because prices would go down...