Monthly Report – March 2026
Why the World Became a “Dry Forest”: A Civilizational Reading of 2020–2026
March 3, 2026
Tomo Nakamaru
Former World Bank Economist
1. The “High‑Pressure Civilization” That Began in 2020
To understand the world of March 2026, we must return to 2020.
During the COVID‑19 crisis, G7 governments simultaneously floored both the fiscal and monetary accelerators to avert a global depression.
- Massive cash transfers
- Zero interest rates and expanded QE
- Extraordinary corporate support
These measures were appropriate as emergency responses, but they left behind a long‑lasting legacy:
the global economy became structurally “high‑pressure.”
Since 2020, it has become “normal” for governments to keep their feet on the accelerator.
2. 2022 — The Return of the Inflation Devil
As a consequence, inflation in the U.S. and Europe surged to around 9% in 2022.
The long‑held belief of 2000–2019 that “inflation is dead” collapsed,
and the world confronted the “inflation devil” for the first time in forty years.
The resurgence of inflation in 2026 is not a mere recurrence.
It reflects a structural transformation of civilization itself.
3. The Federal Reserve’s Achilles’ Heel — A Neutral Rate Set Far Too Low
In the early 2020s, the Federal Reserve assumed the nominal neutral interest rate to be in the 1–2% range.
Yet demographic trends, fiscal deficits, and productivity dynamics all suggest that
the natural rate of interest (r*) was likely much higher.
At the 2025 AEA Annual Meeting, an MIT Sloan professor presented the
“Natural Growth Rate Targeting Rule,” which sharply exposed this miscalculation:
In a world of higher growth, the natural rate rises.
Persistently low interest rates will inevitably reignite inflation.
From 2020 to 2023, the Fed continued monetary easing while underestimating the natural rate,
allowing the inflation devil to return and laying the foundation for the high‑pressure economy of 2026.
**4. Putin’s 2022 Invasion and Trump 2.0’s 2026 Iran Strike —
A “Four‑Year Gap” with the Same Underlying Structure**
The most important civilizational insight is this:
Russia’s 2022 invasion of Ukraine and the United States’ 2026 attack on Iran share the same structural logic.
Putin’s 2022 Invasion — Domestic Pressures
Between 2020 and 2021, Russia faced:
- Falling behind the U.S. and U.K. in the vaccine race
- A surge in COVID‑19 cases
- Worsening inflation and household hardship
Domestic dissatisfaction was rising sharply.
Trump 2.0’s 2026 Iran Strike — Parallel Pressures
Between 2025 and 2026, the U.S. confronted:
- A renewed inflation surge
- Expanding fiscal deficits
- Deepening political polarization
- The Supreme Court’s April 2, 2025 ruling striking down reciprocal tariffs (a major institutional constraint)
Both countries reenacted the classic imperial technique:
“Domestic failure → External aggression to restore political cohesion.”
Hemingway’s warning resonates:
“The universal cure for a mismanaged country is inflation and war.”
5. The World Has Become a “Dry Forest”
Between 2020 and 2026, the world underwent the following transformations:
- Fiscal and monetary acceleration became permanent
- The inflation devil returned
- The neutral rate rose, leaving monetary policy behind the curve
- Great‑power nationalism revived external aggression as a political tool
- Institutions (such as the U.S. Supreme Court) proved unable to restrain great‑power overreach
The result is a world that has become a dry forest,
where a single spark can ignite a global conflagration.
6. Japan — The “Driest Forest” and the Reiwa Bubble
Japan is pressing both fiscal and monetary accelerators
despite the civilizational gravity of population decline, supply constraints, and labor shortages.
But Japan faces additional, uniquely domestic risks.
Ueda’s Bank of Japan: A Severe Case of “Behind the Curve”
After April 2022, the Federal Reserve raised rates by 0.75% repeatedly to fight inflation.
The Bank of Japan, however, refused to follow:
- Maintaining ultra‑low interest rates
- Prolonging YCC
- Tolerating a sharp yen depreciation
This policy mix invited a dramatic yen weakening and imported inflation.
And in 2026, the BOJ Risks Becoming the Sacrificial Lamb of Sanae‑nomics
Under severe labor shortages and supply constraints, Sanae‑nomics simultaneously pushes:
- Fiscal expansion
- Wage‑push policies
- Public investment
- A doubling of defense spending
This policy architecture accelerates inflation without raising real growth.
With rate normalization delayed, the BOJ has lost policy flexibility
and risks becoming the sacrificial victim of a failing high‑pressure economy.
Japan has become the driest forest in the world.
7. Conclusion — Can Japan Be Reborn as a “Small Nation”?
The six years from 2020 to 2026 reveal how
great‑power high‑pressure economics accelerates civilizational aging.
Japan’s path forward is not the prolongation of great‑power nationalism,
but the maturity and reconstruction of small‑nation governance:
- Upholding norms, sovereignty, and international law
- Rebuilding institutions around the civilizational gravity of population decline
- Using fiscal and monetary policy not for “performance growth,”
but for civilizational sustainability
March 2026 will be remembered as the month when Japan was forced to choose
whether it can be reborn as a small nation.
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