This paper analyses the deflation factor in Japan in 90s according to the annual macroeconomic data over the post-war period. Moreover, we considered the influence given to the real economy and the price by a monetary policy through the verification of the neutral proposition of money. Two causes can be possible to be pointed out to the deflation in 90s as a result.
One is decreasing in demand of consumption and investment because of the long recession. It can be thought that this is an direct effect of recession.
Another one is higher rising of Marshall's k than money supply. This means that the velocity of money slowed down seriously despite of enlargement of money supply and many actors in the market were holding money for a long time.
Moreover, the neutral proposition of money examined by the cointegration test and VECM was doubtful in a long term in Japan. This result means that monetary policy has been remaining the strong influence to the real economy while it has been having the weak effect to the price.