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Analysis

Japanese inflation

by Gabriel Stein

Mon 31 Mar 2014

Japanese inflation Enlarge Chart loading Image

What the chart shows: The chart shows the headline rate of Japanese inflation, both monthly and annual changes.

Why the chart is important: Much of the current Japanese economic policy, the so-called Abenomics, rests on breaking Japan’s deflationary cycle and bringing the rate of inflation to 2% by early 2015. After a promising start – the annual rate of inflation accelerated from -0.9% in March 2013 to 1.6% last November – the rise has stalled. Annual inflation seems stuck around 1.5%. Meanwhile, the monthly change has turned negative again, with the level of prices falling in both January and in February (in the Tokyo area, a proxy for next month’s figure, it was zero in March). The rise in the consumption tax in April will of course push up the headline inflation rate; but this is a passing phenomenon and won’t in any case bring what Japan needs, namely demand-pull inflation based on an overheating economy. This further highlights the importance of the weak yen for Japanese prospects – but the yen has, if anything, strengthened this year. Abenomics is so far, at best, a half success.

Chart and comments provided by Oxford Economics www.oxfordeconomics.com