JAPAN'S POST-WAR manufacturing miracle provided a template for China to copy.
Japan's "lost decades" after 1990 served as a cautionary tale to avoid.
Since the covid-19 pandemic and the war in Ukraine, Japan has left deflation behind,
even as China has fallen victim to it.
As China now contends with similar disruption from the war in the Gulf,
could it learn lessons from Japan's example?
After its property bubble burst in the early 1990s, Japan's economy was stuck with heavy debts,
lacklustre spending and falling prices.
The country became synonymous with deflation.
But in 2022 Japan and China traded places.
China's inflation rate fell below that of its smaller, greyer neighbour and stayed there.
The role reversal was later confirmed by the bond markets, which are acutely sensitive to the inflation outlook.
Late last year yields on ten-year Chinese government bonds dropped below Japan's
for the first time in data stretching back over 20 years.
This was not good news.
Although nobody likes high inflation, its opposite can also be a sign of trouble.
China's spell of deflationary pressure, like Japan's, follows a property bust.
Developers defaulted on excessive debts and construction faltered.
A deep decline in property values depleted household wealth and confidence.
The result was a shortfall in domestic spending, putting downward pressure on prices.