Updated: 05 June 2013 2:09 pm (New York Time)
Econintersect: Japanese Prime Minister Shinzo Abe continued to mount his assault on the country’s 14 1/2 year bout of deflation. The new move involves his pledge to increase domestic incomes by 3% a year over the next ten years. In addition he will set up special economic zones specifically to attract foreign investment, outside technology and foreign workers to boost the economy in the face of Japan’s aging population which is limiting growth.
Japan has already set a target of reaching a level of 2% annual rate of inflation by the end of 2014. The new moves are considered essential to achieving that objective. The nature of the deflation in japan was addressed in a recent GEI News article:
Deflation covering 14 1/2 years may not be two decades, but it is certainly close enough that we should not quibble. And the way things are going for Japan a full 20 years could still be reached. They need more than 4.4% inflation to get above the 1998 CPI high point. Although the Japanese government has sworn to move heaven and earth to get inflation up to 2% annually, it is not clear how long it will take to get there, if they ever do.
Update (05 June 2013 2:09 pm, New York Time):
The Nikkei 225 index shed 3.83% following the Abe announcment. The Japanese stock market has now plunged 16.7% in just 10 days.
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Note: Most recent close is not displayed on Yahoo Finance chart.
Sources:
- Japan PM targets income gains in growth strategy (Kaori Kaneko, Tetsushi Kajimoto, Linda Sieg and Shri Navaratnam, Reuters, 05 June 2013)
- Japan: Just How Long has Deflation Held Sway? (GEI News, 01 June 2013)
