Japan: Deflation over?

The economic expansion–the longest in Japan’s post-war history–continues despite some deceleration in the pace of growth since early 2007. A further tightening of the labour market is projected to reverse the decline in wages, helping to sustain output growth of some 1.5-2% in 2008-09 and pushing inflation into positive territory.
The Bank of Japan should not raise the short-term policy interest rate further until inflation is firmly positive and the risk of renewed deflation becomes negligible. It is essential to achieve the target of a primary budget surplus by fiscal year 2011 as a first step in reducing the public debt to GDP ratio. This requires spending cuts and a comprehensive tax reform. Structural reforms are needed to boost productivity, particularly in the service sector, which would help maintain living standards by offsetting the accelerated fall in the working-age population.

©OECD Observer No. 264/265, December/January 2008

OECD Economic Outlook No. 82, December 2007  
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Economic data

GDP growth: -9.8% Q2/Q1 2020 2020
Consumer price inflation: 1.3% Sep 2020 annual
Trade (G20): -17.7% exp, -16.7% imp, Q2/Q1 2020
Unemployment: 7.3% Sep 2020
Last update: 10 Nov 2020

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