Japan has been hopping in and out of deflation for decades. Japan is back in deflation once again. The Wall Street Journal is reporting Deflation’s Return Weighs on Japan
The Bank of Japan faces mounting pressure to loosen its policy as deflation tightens its grip on the nation’s economy, even as some other central banks begin to roll back stimulus steps amid signs of economic recovery.
The Japanese central bank on Friday kept rates unchanged and upgraded its assessment of the economy, citing rising exports and industrial output. The bank, which has stuck with super-easy monetary policy for more than a decade, has hoped to follow other central banks in looking at ways to tighten policy. Instead, Japan’s government and economists are urging it to adopt new easing steps, such as purchasing long-term government bonds.
The calls grew louder Friday after the government declared that the nation’s economy was in deflation — a decline in the general level of prices for goods and services — for the first time since 2006. That year, policy makers concluded the nation had finally shaken off the deflation that had hindered its economy since the late 1990s. The heightened pressure for easing also follows a spate of recent data showing accelerating price declines in broad parts of the economy.
"Deflation is getting very severe," said financial services minister Shizuka Kamei. "We are closely watching what the BOJ can do in this environment."
During the third quarter, the domestic demand deflator — a measure of changes in prices of goods and services except for exports and imports — fell 2.6%, its fastest pace since 1958.
"It’s very important for the BOJ to show the market it has the will to conquer deflation, both through action and through words," Mr. Shirakawa, of Credit Suisse, said. "Otherwise, expectations for deflation will only get worse."
Pure Insanity
Japan has interest rates at 0% and cries scream for more easing. Japan has debt of 200% of GDP in a ridiculous fight against deflation and Mr. Shirakawa, of Credit Suisse wants Japan to "show the market it has the will to conquer deflation".
When does the insanity stop?
Meanwhile back in the US….
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