In many ways, the Japanese economy seems to have returned to the past.
Inflation and wages have returned to the level in the early 1990s, just before the prices deflation and economic stagnation, which became known as the “lost 20 years.”
In response, the BOJ raised the policy interest rate to 0.5 %, raising a quarter point, taking a new step towards the shift from ultra -low interest rates that government officials have been using for a long time.
The interest rate hike on Friday has been a high level since 2008, the third time in the last year, and it was a pace of policy tightening in Japan since 1989. After raising interest rates in March and July last year, the Bank of Japan was stiff at a recent policy meeting to determine if the market would be confused by the appointment of President Trump, who had left the policy interest rate.
As the other major central banks have used high interest rates used to suppress inflation, Japan is against the trend as usual. After encouraging the increase in prices, the Bank of Japan is now raising interest rates to zero or more.
Economists and colleagues have stated that Japan is more like a conventional economy due to inflation and the resurrection of plus interest rates.
Breaking from the deflationary idea of why you need to buy it today may be useful for expenditure and investment. Rising interest rates usually increases the cost of borrowing and cools the economy, but economists suggest that in the case of Japan, monetary tightening can help in the long term. If interest rates rose, there is room for more growth -oriented companies that have been eliminated for “zombies” companies, which have been surviving for many years, and can utilize limited labor supply in Japan more advantageously. It may be born.
“There were many inefficient parts, but in the inflation world, they will be exposed to white sun,” said Ayako Fujita, Chief Economist of JP Morgan Securities. In a sense, interest rate raising is like “opening a box of Pandora”, but “I believe that Japan will eventually have a new and more productive economic growth.” 。
But for now, it is not only inflation, basic salary, and stock prices that have returned to the level in the early 1990s. Japan has faced a situation where the economy has hardly grown in the past 30 years. Japan's gross domestic product (after inflation adjustment) in 2024 is expected to grow about one -quarter of the 1994, while the United States has increased more than twice the economy in the same period.
In Japan, inflation began to settle in the early 1990s after the huge real estate bubble and the stock market bubble collapsed. By the late 1990s, Japan has fallen in full -fledged deflation, that is, the general price of products and services has fallen widespread and continuously, and companies and consumers have postponed large -scale investments and purchases.
In order to get out of Japan from this cycle of prices, wages, and expenditures, the Bank of Japan has begun to buy more government bonds and corporate bonds, overflowing the market with the expectation that authorities will use and lend. The Central Bank adopted a zero interest rate policy in 1999, and in 2016, he stepped further and introduced a negative interest rate. However, these non -traditional tactics had little effect on stimulating economic activities.
In recent years, Japanese officials have taken the opportunity to change the rise in import costs into sustainable inflation, as prices have risen around the world due to pandemic supply chains and geopolitical shocks.
Like the federal preparation system and almost all the main central banks in the world, Japan has declined to hold ultra -low interest rates, rather than raising interest rates to reduce prices. Authorities hoped to create an upwards of salaries and inflation, and encouraged companies to increase import prices and raise their employees.
The cycle seems to be starting in earnest. As of last month, inflation rate in Japan exceeded the BOJ's goal of 2 % for the third consecutive month, and the core consumer price in December rose by 3 %. In recent months, the basic salary has accelerated to the highest level since the 1990s. In last year's spring fight, known as a spring fight, Japan's largest economic organization has agreed to the largest wage since 1991.
The price soaring has been spreading to domestic industries, such as services, and “inflation is finally being incorporated into the economy,” said Societe General in recent reports. “It seems that Japan seems to have definitely broken away from deflation for 30 years in more than two years,” a French bank declared.
Nevertheless, the remaining major concern is whether the revitalization of the Japanese economy will help you break out of Japan from long -term sluggish economic growth. Japan's population is declining, productivity is delayed, and it is still unclear whether wages are increasing enough to support expenditures as households are facing prices.
Japan's consumption has remained relatively weak, as inflation has surpassed wages in most of the past three years. Personal consumption, which accounts for most of Japan's gross domestic product (GDP), has recovered in the last few quarters, which has been a long -term sluggish over the past four quarters.
The International Currency Fund estimates that the Japanese economy in 2024 will reduce 0.2 % in this month's report. The report predicts this year's growth rate of 1.1 % this year. This number is consistent with the prediction of 1 % growth in Europe, but is much less than expected. In the United States, it increased 2.7%.
This year's spring and labor negotiations are likely to repeat the recorded wage rise in the past year, but the recent data led by Japan's largest company is “Improving the wages of the whole economy as a whole. Stefan Henrick stated that it suggested that it would not be connected.
“The growth of wages lacks momentum,” said Unrick. He added, “suggests that households will be tight in early 2025,” in combination with the progress of inflation.
