Despite Prime Minister Shinzo Abe’s efforts, deflation remains a major issue entrenched in Japan. For one of the world’s largest economies, Japan has no quick fixes regarding this issue. Minister Abe, who took office last December, has made it his priority to fight deflation by urging the central bank to commit to a target of 2 percent annual inflation, which is a percentage that economists consider healthy. These efforts are an attempt to get rid of the damaging decline in prices, profits and wages that has troubled Japan for the last fifteen years.
The central bank, under the leadership of its new governor, Haruhiko Kuroda who was appointed this month, started an aggresive and bold plan to reinvigorate economic and price growth. In addition, the bank followed through with its plans for inflation by doubling their holdings of government bonds and Mr. Kuroda described the program as “monetary easing in an entirely new dimension.” Plus, the Nikkei 225-stock index has risen 30 percent since the start of the year, while the yen has fallen 14 percent against the dollar. This provides much to the relief of Japanese exporters, because a weaker yen means that their exports are more attractive abroad.
Written by Kevin Zhang