Japan Government Optimistic About End of Deflation

The government acknowledged that Japan’s prolonged deflation is on the verge of ending while maintaining its upbeat assessment of the overall economy for a second straight month in its monthly economic report for August released Thursday.

“Recent price developments indicate that the deflation is ending,” the Cabinet Office said in the report, noting that the country’s economy is “picking up steadily and shows some movements on the way to recovery.”

Last month, the government of Prime Minister Shinzo Abe upgraded its view of the Japanese economy for the third straight month, using the word “recovery” for the first time in 10 months and claiming that deflation is “easing.”

Despite the change in the phrase describing price developments, economic and fiscal policy minister Akira Amari warned at a press conference after the release of the report that Japan’s economy is still “on the way to the end of deflation.”

“We will be able to say deflation has ended after prices stop continuously falling even if the economy is hit by some shock,” Amari added.

The latest report comes as economic data have suggested that prices have started to rise on the back of Abe’s policies dubbed “Abenomics,” centering on drastic monetary easing that has led to the depreciation of the yen, pushing up import costs.

Japan’s consumer prices rose 0.4 percent in June from a year earlier, marking the first increase in a year and two months, the government said in late July.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza