Japan Considers Declaring Deflation Over, Report States

The Japanese government weighs declaring the end of deflation amid rising prices, evaluating upcoming wage talks' impact

Japan's core inflation, which surged to a four-decade high last year, has exhibited indications of deceleration in recent months. The country's govt is now contemplating the possibility of declaring an end to deflation as prices rise, as reported by the Kyodo news agency.

The government will decide after assessing whether the annual labor-management wage negotiations scheduled for March 13 will yield sufficient strength to counterbalance price increases, in addition to evaluating the forecast for price trends. According to a Reuters report, if this happens, it would mean Japan is finally overcoming the long-standing problem of deflation, which has held back its economy for over twenty years.

In 2001, the government recognized that Japan's economy had entered a period of deflation, marking the beginning of a struggle lasting for much of the subsequent two decades to break a harmful cycle of declining corporate profits, stagnant wages, and subdued private spending.

According to the sources, Kyodo stated that the government will examine various indicators including consumer prices, unit labor costs, output gap, and GDP deflator to determine the end of deflation.

In January, Japan's core consumer inflation slowed for the third month in a row but stayed at the central bank's goal of 2 per cent. This kept hopes alive that negative interest rates might end by April month. The 2 per cent increase in the core consumer prices index (CPI) was slower than December's 2.3 per cent rise, suggesting that lower price increases for imported goods could help ease the burden of higher living costs.

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