Japanese business firms see very low interest rates, but with a seven percent rate of deflation in the most recent quarter, real interest rates are very high. With this rate of deflation, repaying debt has to be any company's best investment. The real interest costs of carrying debt are very high, and the real value of outstanding debts is rising at a 7 percent annual rate. Investment in plant and equipment ceases. The economy contracts.
Profit disappears unless a company is making a lot of money on overseas operations.