Japan must ensure end to deflation, economy minister says

Japan is no longer in deflation, but officials must guarantee that prices do not go back into contraction, according to Economy Minister Yoshitaka Shindo, implying that authorities are still concerned about sluggish consumer demand.

“Before declaring the end of deflation, policymakers must closely monitor important indicators like the production gap and labor costs,” according to Shindo.

“Japan’s economy is no longer in deflation,” Shindo said in an interview with a group of reporters.

“Japan’s economy is steadily progressing” toward putting an end to deflation, he added.

Policymakers believe the economy is no longer in the deflationary phase that began in the late 1990s, but they are reluctant to proclaim a definitive halt to falling prices given the present threats to the weak economic recovery.

Shindo praised the government’s and the central bank’s efforts to lift Japan’s economy, the world’s third-largest, out of deflation.

In January 2013, the government and the Bank of Japan published a joint statement in which the central bank agreed to reach a 2% inflation target as soon as feasible, while the administration promised to tackle pro-growth measures.