Japan at 'inflection point' in fight against deflation

investmentweek.co.uk:

'We should not dismiss the fact a window of opportunity may be opening to exit deflation,' Japan's government said.

In an annual economic white paper, the Japanese government said the country had «seen price and wage rises broaden since the spring of 2022,» adding that «such changes suggest the economy is reaching a turning point in its 25-year battle with deflation».

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«We should not dismiss the fact a window of opportunity may be opening to exit deflation,» the report added.

Inflation peaked in Japan at 4.3% in 2023 and has remained comfortably above 3% throughout the year, exceeding the rates that country has been experiencing for decades.

The government has focused strongly on the problem of deflation since 2001, but has not yet declared the period over, arguing that it needed further evidence that Japan would not return to falling prices.

«We need to eradicate the sticky deflationary mindset besetting households and companies,» it said.

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This was especially the case in services prices, the paper said, arguing they better reflect domestic demand and currently represented only a «moderate» pace of increase.

Last week (26 August), Bank of Japan governor Kazuo Ueda said that underlying inflation was still «a bit below» its 2% target, meaning the bank was still «sticking with our current monetary easing framework».

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