Today in "war on the young" news: Japan, monetary policy, and deflation

The strong yen helps the elderly in Japan at the expense of everyone else.

An elderly woman sits in front of an anti nuclear banner during a demonstration in a street in Tokyo on June 23, 2012. Photograph: Getty Images

Martin Fackler of the Financial Chronicle:

As Japan has ceded its dominance in industry after industry that once lifted it to economic greatness, there has been plenty of blame to go around. A nuclear disaster that raised energy costs. A lack of entrepreneurship. China's relatively low-cost work force.

Increasingly, however, business leaders point to what they call a more immediate threat and one that is at least partly within the government's power to control: a punishingly high yen that has made Japanese exports, whether televisions or memory chips, prohibitively expensive abroad. The government is doing almost nothing to try to rein in the yen, despite general alarm that the record-high currency is dealing crippling blows to the country's once all-important export machine.

One big reason, analysts and some politicians say, is simple, if generally left unsaid: A high yen benefits Japan's rapidly expanding population of elderly residents, even if it is hurt[ing] other parts of the country.

A strong yen makes imports cheaper, and for a country which has to export a huge amount annually, that is a big contributor to deflation. That deflation helps stretch savings and pension pots, while increasing the indebtedness of the young. Additionally, by damaging the competitiveness of the country's exports, it makes it harder than ever to escape from the stagnation it has experienced for much of the last two decades.

As Tyler Cowen, to whom I owe the pointer for this story, says:

How many major political battles do the elderly actually lose?