Japan’s election on Sunday probably isn’t foremost in Janet Yellen’s mind. But the headwinds holding back Asia’s No. 2 economy offer insights into why inflation isn’t the urgent problem the Federal Reserve chair fears.

Yellen leads the globe among monetary bigwigs bracing for accelerating consumer prices. Last weekend, she said her “best guess” is that inflation will perk up soon.

She’s hardly alone, as European Central Bank President Mario Draghi and Bank of England Governor Mark Carney make similar noises. Yellen, though, seems particularly confident that normal business is resuming at long last.

Perhaps, but Yellen’s inflation worries are overdone. To understand why, consider the Bank of Japan’s plight dating back more than a decade.

By March of 2006, then-Governor Toshihiko Fukui was comfortable enough with growth trends to scrap the BOJ’s five-year-old quantitative-easing program.

Four months later, he hiked short-term rates by 0.25 percent. Another tightening in February 2007 put borrowing costs at 0.50 percent. With remarkable speed, pricing power among companies weakened and any hints of accelerating growth vanished.

To be sure, there are notable differences between the US economy today and Japan circa 2006.

Corporate America acted much quicker to dispose of bad loans and toxic assets than Japan Inc., which is still paying the price for years of inaction. But the hangover from the “Lehman shock,” as Japanese call it, and the China-driven shock to global prices are, together, a significant headwind on US growth and wage dynamics.

Just like Japan, current conditions are upending old relationships between growth and wages like the non-accelerating inflation rate of unemployment, or NAIRU.

In my Washington days covering the Alan Greenspan Fed in the mid-to-late 1990s, NAIRU debates were everything.

Former Chairman of the Federal Reserve Alan Greenspan speaks about "Brexit" and the state of the European and US economies during a discussion with Bloomberg Government at their offices in Washington, DC, June 27, 2016. / AFP PHOTO / SAUL LOEB
Remember me? Photo: AFP/Saul Loeb

So-called wage-push inflation dominated every Fed decision, every trade in the bond market and every exchange between Greenspan’s team and politicians. Today, debates center on what might be called wage-pull dynamics.

In a recent report on the topic, Steve LeVine of Washington-based advisory Axios observes: “Workers in the wealthier nations are facing similar headwinds, like declining union membership, increased competition from foreign workers in a global marketplace, and slow productivity growth. But no one knows precisely why economics are failing to observe the traditional supply-and-demand rules.”

Yet Fukui and current BOJ head Haruhiko Kuroda can help Western analysts – and Fed officials – fill in the blanks.

The missing link: elected officials fobbing off too many responsibilities on central banks that lack the tools to succeed.

The missing link: elected officials fobbing off too many responsibilities on central banks that lack the tools to succeed.

Like a strong cup of coffee, easier credit can reanimate activity. Over time, though, money supply shifts can’t awaken the animal spirits of which John Maynard Keynes wrote. That requires structural changes that catalyze growth and confidence organically, not via short-term stimulants.

On Sunday, Japanese voters are expected to re-elect Prime Minister Shinzo Abe’s Liberal Democratic Party.

Popular Tokyo Governor Yuriko Koike has shaken things up with her new Party of Hope. But the LDP is relying on its vast resources, near-lock on older and rural voters and North Korea’s missiles to pull off another win despite modest successes on the economy.

This is the same outfit, remember, in power in 2006 when Fukui tried, and failed, to normalize the rate environment.

It’s the same crowd that in 2012 said Abenomics would defeat deflation and give workers the sizable raise they haven’t see in two decades, to no avail. Now, these reformers-who-cried wolf want voters to give them yet another chance to fob off their responsibilities on the BOJ.

So far, Abenomics is really just Kurodanomics. Abe’s revival plan has three “arrows” aimed at slaying deflation: monetary easing, fiscal loosening and a deregulatory big bang.

While Tokyo 2020 Olympics construction provided a fiscal boost, Abenomics has been 90% Kuroda easing and, at best, 10% structural change.

While Tokyo 2020 Olympics construction provided a fiscal boost, Abenomics has been 90% Kuroda easing and, at best, 10% structural change.

The reform wins claimed by Abe – better corporate governance, for example – aren’t enriching the masses.

Even with drum-tight labor markets and the best run of growth in 11 years, real wages rose just 0.1 percent in August following a 1.1 percent drop in July. Nothing Abe is pledging ahead of Sunday’s vote will change this disconnect.

It’s also one Yellen – or whoever might replace her next year if she doesn’t get a second term – increasingly will encounter as political gridlock keeps the Fed on the hot seat. The chaos surrounding Donald Trump’s White House augurs poorly for structural upgrades to raise US competitiveness and wages.

If Japan taught economists anything it’s that politicians get addicted to zero rates.

If Japan taught economists anything it’s that politicians get addicted to zero rates.

Central banks spreading their tentacles into government, corporate, asset-backed and mortgage-backed debt and real-estate investment trusts get trapped.

They also deaden the urgency for elected officials to do their jobs to generate employment growth and wages.

Look no further than US President Donald Trump pointing to surging stock markets as proof he’s achieved big things on economic retooling (he hasn’t).

The most frustrating thing about Sunday’s election is that an Abe victory will do little to reanimate the NAIRU relationships of old.

Such complacency is bubbling over into Yellen’s experience – and offering a cautionary tale for those in the West thinking normal business has returned.