Japan considers declaring end to deflation

Japan’s government is considering declaring an end to deflation in the wake of rising prices, Kyodo news agency reported, citing sources with knowledge of the matter.

The government will make a decision after determining whether annual labour-management wage talks due March 13 will turn out strong enough to offset price hikes and also consider the outlook on price trends.

If realised, it will mean Japan would break free from deflation that put a drag on economic activity for well over two decades, the sources said.

The government acknowledged that Japan’s economy was in deflation for the first time in 2001, with the nation struggling for much of the past two decades to break a vicious cycle of lower corporate profits, tepid wages and weak private consumption.

In judging an end to deflation, the government would scrutinises a broad range of indicators, such as consumer prices, unit labour costs, output gap and GDP deflator, Kyodo said, citing the sources.

It is pertinent to mention here that Fumio Kishida on Thursday became the first sitting Japanese prime minister to appear before a parliamentary ethics committee, as he sought to draw a line under a funding scandal that has hurt his popularity and may delay next year’s budget.

Kishida’s attendance followed weeks of wrangling between the opposition and the ruling Liberal Democratic Party (LDP) over the technicalities of how to hold the hearings, which will look into how some LDP factions failed to report hundreds of millions of yen from fundraising parties.

The opposition had demanded a full public hearing that would include the five key members of the biggest faction caught in the scandal. The LDP had argued for a closed session.