Clearly, the policy makers in the US and the UK don't want to take on the bubbles in real estate assets yet. The US has a much larger resource base and the habit of importing a lot of manufactured goods. It also uses the dollar, which just about every country in the world uses, if not as a domestic currency, as a way to hold reserves and manage trade in goods and services.
The Japanese are condemned because they import all their resources, and so are exposed to swings in commodity prices and currency exchange rates (though it's starting to happen in Asia, for the most part, only Japan holds yen).
I think stagflation, over deflation, is quite possible in the US, but you'd have to agree at what levels an increase in prices is 'inflationary'. Actually I said this months ago, here on LBO T, so if right, I would expect you to subscribe to MY newsletter and pay my paypal account (if they existed).
Deflation was fed in Japan by companies neither being able to sell what they produced nor export it. The situation with a high yen and cheap commodities (reinforced by the high yen) meant the Japanese companies lost all options to deal with the problems.
So now all they do is hold meetings and talk about 'reforms' that are sure not to really do much of anything to raise the economy out of deflation (yeah guys, clear those bad loans off the books and implement 'western' standards of risk analysis, whatever the fuck those might be--Enron and WorldCom corporate bonds my ass). All this does is create firesale conditions for private equity, and US private equity now has trillions of yen invested in Japan looking for 30-40% returns for the next 3-5 years. It's wonderful to aspire to be the next S. Korea or Thailand, but faith in Japan in how institutionally and collectively to respond to the global economy must be at an alltime low (though the Nixon 10% tariff shock and two oil shortages in the 70s come close).
In the case of US companies, they'll import less in response to increased inventories of unsold stuff and a cheap dollar buying less (and making imports harder to sell). But will the 'productive' US economy then meet actual demand without raising prices, even though both oil and steel are more expensive? (BTW, about that growth in labor productivity, over the past 8 years, the US has been outranked by Ireland, Greece, Spain and many Nordic countries, and even the UK is just a hair off the US's achievements, so I wouldn't put a lot of faith in that so-called 'miracle'.)
Yeah, stagflation seems more likely, I think.
CJ
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