So while deflation or very low inflation in these countries is probably a sign of temporarily weak demand, which is something that policymakers there presumably wish to address, it still does not seem all that likely that they will find themselves in a deflation trap of the kind sketched out above. What about the US?
We have been told for years that returns to capital are high, associated with the stronger productivity growth. For most of the late 1990s, markets certainly behaved as though that was their expectation. If it were still thought that prospective returns are pretty good, then one would be unlikely to worry about getting into a deflation trap.