In a potential historic shift, Japan’s government is reportedly contemplating declaring an end to the country’s prolonged battle with deflation, as prices steadily climb, according to sources familiar with the matter.
The decision, anticipated after scrutinizing the outcome of annual labour-management wage discussions scheduled for March 13, hinges on whether these talks will yield substantial wage increases capable of offsetting the recent surge in prices. The government is also expected to factor in the future trajectory of price trends before making a final determination.
If realized, this move would mark a significant milestone for Japan, finally breaking free from the deflationary grip that has plagued its economy for more than two decades. The country first acknowledged its descent into deflation in 2001, setting off a prolonged struggle against a vicious cycle of dwindling corporate profits, sluggish wage growth, and lackluster consumer spending.
To gauge the potential end of deflation, the government will meticulously analyze a variety of indicators, including consumer prices, unit labor costs, the output gap, and the GDP deflator, as reported.
While the shift signifies a potential turning point for Japan’s economy, it also underscores the delicate balancing act the government faces in managing its economic recovery. As Japan prepares to bid farewell to deflation, the focus now shifts to ensuring sustainable growth and stability in the years ahead.
(Source: Kyodo | Reuters)
