USING MINIMUM WAGE TO COMBAT DEFLATION
/Japan's long lasting deflation will ultimately affect Hawaii's economy. Minimum wage can combat this economic phenomenon. As Paul Krugman's article in Insight states (StarAdvertiser, 9/19/15), "Japan needs to make decisive break with its deflationary past." The real reason for them hoarding cash and avoiding borrowing is their bleak view of future. Giving hopes to the Japanese is the cure.
Since 1990, wages fell by 3.5% while consumer prices rose about 5.5% mainly from the rising cost of utilities. Japan firms, however, accumulate their cash holding to the stunning level of $2.1 trillion or 44% of its GDP. With no dividends and pay raise in sight, saving rate certainly accelerate. Imposing higher minimum wage forces businesses to reduce its cash holding which subsequently will stimulate consumer spending.
In contrast, Americans have severe spending problem. As such, imposing the $15 an hour minimum wage may cause more economic problems than solving any.
