Indeed, with the decline in union power across industrial countries and the increase in temporary or even “zero hour” workers, downward wage flexibility may be significantly higher than previously estimated. While not without social costs, such flexibility allows an economy to cope with sustained deflation.
Another concern has been that moderately low inflation spirals down into seriously large deflation, where the zero lower bound on nominal interest rates keeps real interest rates unconscionably high. Once again, it is not clear this happened in Japan.