"Lost thirty years" about to become history? Japanese government to officially announce end of deflation

According to a report by the Japanese news agency Kyodo, on Saturday, some unnamed government sources revealed that the Japanese government is discussing officially declaring that the country has "defeated deflation." The government is considering issuing a statement after weighing this year's wage negotiations to confirm whether Japanese wages will see strong growth alongside rising prices. The proposal, as reported by Kyodo, includes Japanese Prime Minister Fumio Kishida and other cabinet members publicly stating at a meeting and press conference that Japan has overcome its long-standing deflationary environment, with further clarification to be provided in the monthly economic report for that month. The market is closely watching the timing of the Bank of Japan's next interest rate hike, which would be the first since 2007. Bank of Japan Governor Haruhiko Kuroda recently stated that the price target has not been confirmed, and the bank will continue to monitor whether a "virtuous cycle between wages and prices is beginning to shift towards upward movement." The latest statistics show that Japan's core consumer price index, excluding fresh food, rose by 2% year-on-year in January, exceeding economists' expectations. This marks the 22nd consecutive month that the inflation rate has hit or surpassed the 2% target set by the Bank of Japan. Meanwhile, Japan's labor market remains very tight in the month, forcing companies to promise more stable and robust wage growth in annual wage negotiations with labor unions. Before making the decision to declare "victory over deflation," the Japanese government will focus on consumer price indices and other key economic data related to inflation and wages. Japan's deflationary issue has persisted for over 30 years, from the burst of the 1990s bubble economy to recent signs indicating the possible end of deflation. Despite 22 consecutive months of inflation exceeding the central bank's target, the Japanese government has not officially declared victory over deflation. This 30-year period of deflation is often referred to as the "Lost Three Decades," during which Japan experienced prolonged economic stagnation and a trend of falling prices. The Heisei era in Japan (1989-2019) marked a transition from the complete collapse of the bubble economy to a prolonged economic downturn, earning it the nickname "Lost Three Decades." As the Heisei era came to a close, various sectors of Japanese society reflected on and remembered the era, with renowned economist Yukio Noguchi offering a special work titled "Lost Three Decades" as a farewell to the era. This name has since become widely known in Japan and globally, often used to refer to Japan's ongoing deflationary era from the early 1990s. According to a document released by the Japanese government for the 2023 fiscal year, the government believes that the Japanese economy may currently be at a turning point, with signs of rising prices and wages beginning to expand simultaneously. This suggests that the Japanese economy may be nearing the end of its long-standing deflationary state by 2024. In its annual economic white paper, the Japanese government points out that since spring 2022, signs of rising prices and wages have been expanding, indicating that the Japanese economy may be reaching a turning point in ending its 30-year battle with deflation. However, the report also notes that despite positive signs, the growth rate of service prices and wages remains relatively moderate, with wage growth in particular being a key factor in assessing inflation trends.