Japan Plans to Announce Success in Overcoming Deflation. The Japanese government is discussing making an official announcement that the country’s economy has successfully overcome deflation.
Japanese news agency Kyodo reported that based on information from sources who did not want to be named, there were documents regarding the decision to announce the end of deflation. The decision came after considering this year’s labor wage negotiations, to check whether wages increased in line with price increases.
Kyodo reports that the proposal includes Prime Minister Fumio Kishida and other cabinet members publicly saying in press conferences that the country has emerged from deflation, as well as including it in monthly economic reports.
Japan has been struggling with ‘acute deflation’ that has plagued the country for 25 years. This condition suppressed company profits and hampered the growth of workers’ wages, as a result private consumption experienced stagnation, even though its contribution was very large to the Japanese economy.
Japan Plans to Announce Success in Overcoming Deflation. The end of deflation also brings hope that the Japanese economy will emerge from prolonged stagnation.
Meanwhile, the market continues to observe the timing of the next Bank of Japan (BoJ) interest rate increase, because it will be the first since 2007. Citing data from Trading Economics, the BoJ has maintained its benchmark interest rate at -0.1% since 2016 after previously being at level 0 % for five years.
Japan’s benchmark inflation exceeded estimates in January, with consumer prices excluding fresh food rising 2% year-on-year (YoY). This condition occurred for 22 consecutive months where inflation equaled or exceeded the target of the country’s central bank.
On the other hand, currently the Japanese economy is facing a recession because it has contracted for two consecutive quarters. Quarter IV/2023 was recorded at -0.1% and quarter III/2023 was -0.8%. In fact, this condition made Japan have to be more open-minded because the country was knocked out of the third largest economy in the world.