Deflation in Japan approaching an end, suggests government

The Japanese government has today offered a more positive view of the country’s economic situation than it has in the past four years, suggesting that Japan may be nearing an end to the deflation which has affected the market in recent months.

The government’s report is based on an in-depth assessment of consumer prices across Japan during the last economic quarters, and their findings suggest that deflation may finally be coming to an end, as increased consumer prices revealed a steady improvement in Japan’s economy, thus allowing companies to pass on the rising costs to its customers.

The government’s economic report for August stated that “recent price developments indicate that deflation is ending,” offering a much brighter perspective than the previous month’s report, in which it was revealed that whilst consumer prices had also risen, this was due to higher electricity bills, rather than increased consumer demand. The August report’s positivity continued, stating that Japan’s economy was “picking up steadily and showing some moves toward a sustained recovery.” However, the report was keen to stress that such news did not mean that Japan could dispense with the notion of deflation entirely, emphasising that the nation would need to demonstrate more lasting rises in consumer prices in order to secure its status as a country which had made a successful exit from deflation.

The report was also optimistic in its review of Japan’s job market, revealing unemployment rates of just 3.9%, the lowest recorded in Japan since October 2008.

A potential end to deflation, coupled with impressive unemployment rates, will no doubt play heavily in Japanese Prime Minister Shinzo Abe’s favour, who made economic improvement his key policy throughout his election campaign and in the following year. The Bank of Japan will also benefit from such positive reports, having heavily funded the country in April in order to achieve its two per cent inflation target in two years.

Sources include Japan Daily Press, Reuters

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