First, a bit of the money theory. It usually called one of theories, but to me, it's the only one that's working. In short, all money is debt. And it's not the debt that banks take from Fed or Central Bank, it's debt which is taken by people and businesses. Because only this debt is used to buy goods and services. Yes, there is some paper money in circulation, but the volume is microscopic comparing to the total amount. When people say that Fed (or Central Bank) is printing money, that's wrong. In reality money is created by businesses and people which are taking credit to buy goods and services. That credit is usually provided by banks, which need to get credit from each other and Fed to have enough money. Thus, the debt pyramid is build bottom to top, not other way around. The problem with credit money is that credit has to be paid with interest. It means that either money mass should increase in time, or there would be a lot of credit defaults, bankruptcies and financial crisis every several years. Exactly what was happening during "good" days of the Gold Standard, which forced deflation. So, some inflation is necessary. Best growth rates for economies were reached when inflation was between 3 and 5 percent. Despite that, Central Banks of the developed world want inflation in range 2-2.5%. Beats me. In normal times, Central Banks regulate inflation using interest rates. Problem is, when rate is either zero, or pretty close to it, you need different tool. Here comes quantitative easing. Central Bank injects more money buy buying debt, public and/or private. But, remember, money doesn't affect prices unless it it's used to buy goods and services. QE affects consumer debt by reducing rates on private debt. In US low rated trickle down to business and consumer debts, thus increasing money available to buy goods and services. It will be happening in Europe as well, when Euro QE starts for real.
Problem in Japan: link between QE and consumer debt doesn't exist. Money from Central Bank is going to banks, which repair their balance sheets, but in no hurry to lend to consumers. Consumers themselves aren't that ready to use consumer credit to buy goods and services. They want to save, but for the good of economy as whole they need to spend. They need to change culture, which is a very slow process.
But there is another problem as well. Japanese economy is not open, like EU or US. It's hard to import goods, even when official barriers don't exist. To support exports, government buys hundreds of billions of dollars, but growth of export increases value of yen, which forces government to buy more dollars. Cursed circle... Japan is slowly opening economy, but it creates extra deflationary pressure, because internal prices for many goods are just crazy. Just search Google for food prices in Japan... And imports drive those prices down (deflation). In the end (another generation or two), Japan will become another open, consumer based economy. Maybe...
That's why I think that US will be OK. And Europe, too. Because these are open economies, with channels which move money from Central Banks to private banks to businesses and consumers. This process is slow and painful. But it works.
As usual, it's not just an idle speculation. I write my blog in order to get my thought in order and make investment decisions. I am going to hold on my US holdings, buy more Europe and avoid Japan.