In its latest annual economic white paper, the Japanese government has emphasized the progress made in eradicating deflation after 25 years, stating that “we should not overlook the fact that the opportunity to end deflation is approaching” and urging close collaboration with the Bank of Japan.
The Japanese Cabinet has titled this year’s white paper “Taking Action on Inflation and Wages,” marking the first time “inflation” has been mentioned in the subtitle in nearly 50 years.
Economists are closely watching Japanese Prime Minister Fumio Kishida to see when and if he will formally declare an end to deflation, as this could impact monetary policy.
If Fumio Kishida makes such a statement, it could trigger speculation about normalization in the markets, making it easier for Bank of Japan Governor Haruhiko Kuroda to shift the central bank‘s ultra-loose stance.
While Japan’s inflation this year has consistently exceeded the central bank’s 2% target, the white paper indicates that the risk of deflation making a comeback cannot be ruled out.
