"Welcome to the real world," says Morpheus, captain of the hovercraft Nebuchadnezzar. That is how the cult-movie serial "Matrix" first ventured out into its progressively surreal world. Fans avidly await the coming of the third and (supposedly) last installment of the saga later this year.
Meanwhile, the real economy in Japan is beginning to look increasingly more illusory, if not quite totally surreal. "Welcome to the real world" might well have been the sentiment of Mr. Heizo Takenaka, the economics and finance minister, when he commented on Japan's GDP statistics for the April-June quarter released in August. Indeed he actually went so far as to say that the GDP growth figure came out a lot stronger than he had dared hope. A not entirely unjustifiable sentiment, since the figure came in at a rather robust quarter-on-quarter growth of 0.6 percent. In real terms, that is to say.
However, in nominal terms, or before adjustment for price developments, the equivalent quarter-on-quarter growth rate was a mere 0.1 percent. How can that happen? It happens because prices are falling. Welcome to the world of deflation. In a world of falling prices, strong real term growth is nothing to rejoice over. A fat lot of good it would do people if they were selling large amounts of goods but losing money doing so because of falling prices.