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Japan's Inflation under Global Inflation Synchronization

Author

Listed:
  • Ichiro Fukunaga

    (Bank of Japan)

  • Yosuke Kido

    (International Monetary Fund)

  • Kotaro Suita

    (Bank of Japan)

Abstract

In this paper, with a brief examination of the global inflation synchronization, we analyze the effects of domestic and global factors on Japan's consumer price inflation and related variables (inflation expectations, nominal wages, etc.) since the late 1990s, when Japan fell into deflation, mainly using structural vector autoregression (SVAR) models with short- and long-run zero and sign restrictions. Historical decompositions show that various types of global shocks, including downward cost pressure due to globalization, had continuously pushed down Japan's consumer prices until the late 2010s. Subsequently, their contribution reversed, significantly pushing up prices, especially in the high-inflation phase after the pandemic. In addition, we find that service prices and nominal wages, which had not been much affected by global shocks, have also been pushed up significantly by global shocks in the recent period.

Suggested Citation

  • Ichiro Fukunaga & Yosuke Kido & Kotaro Suita, 2024. "Japan's Inflation under Global Inflation Synchronization," Bank of Japan Working Paper Series 24-E-4, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp24e04
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation; Monetary policy; Globalization;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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