When Will Japan Declare The End of Deflation?; Move May Come After BOJ Abolishes Negative Interest Rate Policy

The Yomiuri Shimbun

15:46 JST, March 20, 2024

The government intends to work with the Bank of Japan to cast off deflation and achieve sustainable economic growth. The focus is now on whether the nation could declare the end of deflation.

During a meeting with Bank of Japan Gov. Kazuo Ueda at the Prime Minister’s Office on Tuesday, Prime Minister Fumio Kishida confirmed that the government will continue to conduct flexible policy management.

Regarding a joint statement released by the government and the BOJ in 2013 that specified a 2% inflation target, Kishida told reporters after the meeting that there was no need to review the target.

“We will employ every possible means to completely break free from deflation and shift to a new growth-oriented economy,” Kishida said. Kishida is aiming to transform Japan from a cost-cutting “cold temperature economy” with low prices, low wages and low growth to a “growth-oriented sustainable temperature economy” driven by sustained wage increases and active investment.

While some in the government believe that declaring an end to deflation will help boost the administration, others are cautious about the declaration. “We will be in a miserable state if deflation immediately returns after the declaration,” a senior government official said.

Kishida said that he would consider issuing the declaration after looking at a wide range of data, including consumer prices and wage increases.

“There are still some areas of concern in terms of consumption,” said Yoshitaka Shindo, minister for economic revitalization. Shindo said at a press conference that the trend of higher wages needs to be expanded to small and midsize enterprises as well as rural areas.