Inflation in Japan: Changes during the Pandemic and Issues for the Future
December 8, 2022
As the impact of COVID-19 pandemic eased and economic activity resumed, prices have risen sharply in the U.S. and Europe, partly due to the impact of rising commodity prices. Although not to the same extent as the U.S. and Europe, in Japan inflation rates have also been rising, especially for goods prices. In order to further develop the discussion on the nature of these recent price developments in Japan and their outlook, this paper (1) summarizes the characteristics of inflation dynamics in Japan before the spread of COVID-19, mainly using the framework of the Phillips curve, (2) confirms the recent changes and characteristics of price developments, and (3) summarizes the issues for the future. Based on the fact-finding of this paper, we conclude it is important to accumulate analyses on the stickiness of service prices, nominal wage rigidity, and uncertainty in inflation expectations, which are characteristic of Japan, in order to further deepen the discussion on these recent price developments.
E30; E31; J30
Phillips curve, Cost push, Price rigidity, Inflation expectations, Wages
The work in this paper was presented in the second session of "The Phillips Curve and Cost Pass-Through in Japan," the second workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic" held at the Bank of Japan on May 30, 2022. The authors thank Kosuke Aoki, Naohito Abe, Seisaku Kameda, Keiichiro Kobayashi, Mototsugu Shintani, Ryo Jinnai, Takayuki Tsuruga, Taisuke Nakata, Tsutomu Watanabe, and staff members of the Bank of Japan for their valuable comments. Any remaining errors are our own. The views expressed in this paper are those of the authors and do not reflect the official views of the Bank of Japan.
- *1Research and Statistics Department, Bank of Japan
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- *2Research and Statistics Department, Bank of Japan
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- *3Research and Statistics Department, Bank of Japan
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- *4Research and Statistics Department (currently Personnel and Corporate Affairs Department), Bank of Japan
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- *5Research and Statistics Department (currently Financial Markets Department), Bank of Japan
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- *6Research and Statistics Department, Bank of Japan
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- *7Research and Statistics Department (currently Monetary Affairs Department), Bank of Japan
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- *8Research and Statistics Department (currently Secretariat of the Policy Board), Bank of Japan
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