Those who bought their first house in 1990, thinking that in five years they would parlay their housing appreciation into a bigger house, found that the rules had changed. Ten years later, they would be lucky to get back enough to pay their remaining mortgage. Disinflation not only freezes property values but also keeps the young family from shrinking the percentage they spend on housing. But that same couple living in Japan faces a worse situation. Deflation causes real estate values to plunge.
Deflation causes a squeeze on prices.
In times of low inflation, companies can raise prices to maintain their profit margin without losing market share. In deflationary times, most companies cannot raise their prices without losing business. Cutting costs also means cutting jobs and reducing salaries. One would think that if high inflation lenders hurt, they would benefit from the opposite, deflation. True, if borrowers continue to pay their loans.