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Chronic Deflation in J apan
Author(s) -
Nishizaki Kenji,
Sekine Toshitaka,
Ueno Yoichi
Publication year - 2014
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/aepr.12041
Subject(s) - deflation , economics , inflation (cosmology) , deregulation , exchange rate , monetary economics , phillips curve , zero lower bound , keynesian economics , price level , nominal interest rate , interest rate , macroeconomics , monetary policy , real interest rate , physics , theoretical physics
J apan has suffered from a long‐lasting but mild deflation since the latter half of the 1990s. Estimates of a standard P hillips curve indicate that a decline in inflation expectations, the negative output gap, and other factors such as a decline in import prices and a higher exchange rate all account for some of this development. These factors, in turn, reflect various underlying structural features of the J apanese economy. This paper examines a long list of these structural features that may explain J apan's chronic deflation, including the zero lower bound on the nominal interest rate, public attitudes toward the price level, central bank communication, weaker growth expectations coupled with declining potential growth or the lower natural rate of interest, risk‐averse banking behavior, deregulation, and the rise of emerging economies.