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Chronic Deflation in Japan

Kenji Nishizaki, Toshitaka Sekine and Yoichi Ueno

Asian Economic Policy Review, 2014, vol. 9, issue 1, 20-39

Abstract: type="main">

Japan has suffered from a long-lasting but mild deflation since the latter half of the 1990s. Estimates of a standard Phillips curve indicate that a decline in inflation expectations, the negative output gap, and other factors such as a decline in import prices and a higher exchange rate all account for some of this development. These factors, in turn, reflect various underlying structural features of the Japanese economy. This paper examines a long list of these structural features that may explain Japan's chronic deflation, including the zero lower bound on the nominal interest rate, public attitudes toward the price level, central bank communication, weaker growth expectations coupled with declining potential growth or the lower natural rate of interest, risk-averse banking behavior, deregulation, and the rise of emerging economies.

Date: 2014
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Asian Economic Policy Review is currently edited by Takatoshi Ito, Akira Kojima, Colin McKenzie and Shujiro Urata

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