The inflation numbers suggest Prime Minister Shinzo Abe's policies known as Abenomics, which are a mixture of big government spending and central bank monetary designed to drag the economy out of years of deflation and laggard growth, have made headway.
This past weekend’s election should go a long way toward improving sentiment in the Abe government and their ability to generate an export led economic recovery based on increasing asset prices and a weakening currency. Abe popularity was solidified this weekend, and with Governor Kuroda leading the Bank of Japan, yield should remain low allowing the currency to weaken in value.
and inflation expectations so high in Japan?
"The sharp fall in import price inflation points to a slowdown in consumer inflation in coming months, which should provide some relief to household's battered finances."
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The Japanese average annual inflation rate peaked in 1974 at 23.1% with the 12 month period ending in February 1974 actually reaching 25% inflation. Average annual U.S. inflation peaked six years later in 1980 at “only” 13.5% but the individual 12 month period ending in March 1980 had a peak of 14.76%. Japanese inflation crossed below U.S. inflation in 1978 and has remained below until 2014.
When inflation is not ‘always and everywhere’ a …
After resigning in September 2007 for health reasons, on September 26, 2012 Prime Minister Shinzo Abe staged a political comeback. After more than 20 years of stable to falling prices and a stagnant economy, the Japanese people are tired of deflation and Abe is credited with the improvement in the Japanese economy through an inflationary policy combining increased government spending with unprecedented monetary easing. This approach has been labeled “” and so far has resulted in inflation rates spiking up to over 3% in 2014.
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Japanese inflation ticked upward over the next four years and by 1991 it had reached an annual average of 3.28% but over the following four years it declined so by 1995, registered a deflationary . For the next 18 years from 1995-2013 Japan battled deflation with only 1997 and 2008 having inflation above 1%.
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During the 1970’s inflation in Japan spiked to an annual average of over 23% in 1974 up from 6.42% in 1971. Inflation in the U.S. was also spiking at that time but “only” averaged 11.04% in 1974 and 4.38% in 1971. By 1979 however, U.S. inflation was averaging 13.37% but Japanese inflation had fallen to 3.77%. 1980 saw the final spike in Japanese inflation to 7.82% for the year (while U.S. inflation averaged 13.5%) and from there Japanese inflation fell steadily until it was virtually non-existent at 0.11% in 1987.