Examine the real interest rate in Japan, plotting since 2000 the nominal interest rate on Japanese Treasury bills (FRED code: INTGSTJPM193N), the inflation rate based on the percent change from a year ago of Japan’s consumer price index (FRED code: JPNCPIALLMINMEI), and an estimate of the real interest rate based on the difference between these two indicators. Comment on the lengthy period of positive real rates since 2000 and the role of deflation in these rates. Comment on the risks that deflation poses in an economy with nominal interest rates at the effective lower bound.