Does deflation come to end in Japan?
Japan's consumer price index and core inflation rose 0.1 percent in November. This situation brought out the arguments that the seven-year deflation process whether comes to end or not after the November rise for the first time in two years.
Naoki Iizuka Chief Economist of Dai-Ichi Mutual Life Insurance stated that the November increase in consumer prices is being seen as a sign of the end of
Japan's long deflation.
About two years ago, in October 2003, the index also rose, but economists dismissed that gain, saying it was because of one-time factors like a spike in the price of rice, because of a poor harvest.
Iizuka and the other Japanese economists expect core inflation starts to increase by the end of this year and show “solid” gains in the first quarter, increasing the chances for the central bank to shift from its five-year policy of pumping cash into the economy and holding rates at near zero to help overcome deflation.
The central bank stated that it will not change its deflation-fighting policy until three conditions are met – core prices stop falling for at least a few months, policy makers are sure they will not resume sliding, and the bank is confident about the overall strength of the economy.
Chief Cabinet Secretary Shinzo Abe noted that the overall price index, including food and energy prices, actually dropped 0.2 percent in November.
Abe said “The government has not changed its understanding that
Japan is in deflation. The government and the Bank of
Japan are working toward the same goal, getting out of deflation. We leave the measures up to the Bank of
Japan, but the deflation can only be beaten through join efforts by the government and central bank”.