TheLandOfTheRisingSun
Prices Fly Rocket High
Inflation Rate of Japan
Why must Japan increase inflation?
With absolutely no doubt, every economy must face inflation if it’s expanding. Most of the time, economists consider inflation to be a bad thing, nearly as a threat to the economy. Also when they look at its best advantage, they perceive it as an acceptable effect of stimulating economic growth. The mainstream theory states that when the economy has idle resources that are available but not used, vacant offices, and unemployed people qualified for work yet sitting at home seeking a job, the government uses monetary and/or fiscal policy, which aim to influence the economy’s money supply, the amount of money circulating in the economy, to fuel up the economy and thus find a job for the unemployed and put these employees into offices. However, once these two policies are implemented, inflation is the inescapable consequence. However, Japan’s unemployment rate is very low, and its economy is expanding above the expected growth rate. Therefore, according to the mainstream theory, implementing the monetary and/or fiscal policy will be unnecessary for Japan’s economy, and thus inflation won’t be its result. However, why are there voices telling Japan to increase its inflation rate? There are many several reasons actually.
The first and main reason is that inflation reduces debt. Since the government focuses mainly on the elder people, and spends excessive amounts of money on them, the government becomes on debt. The government’s debt denotes its promise to transfer resources from the young, who work and pay taxes, to the old. Since japan is an aging society, there are more old people than young ones, the debt burden is even more difficult to tolerate. Thus, an increase in the prices of commonly purchased goods and services must be implemented in order to receive more revenue and pay back the debts. In addition to the above, another reason to why inflation rate must be raised in Japan is that when there is high inflation, the labor force, which consists of mostly young people, will get higher wages. This would increase hopefulness and would optimistically raise the fertility rate, which would definitely help the government stabilize its debts without taking any major risks and extreme measures to do so.
So what is the Inflation rate of Japan?
In Japan, the consumer prices increased 0.5% in November 2016, followed by an increase of 0.1% in the next month of December.
The inflation rate in November was the highest one since May 2015 which was raised by the high fresh food prices. Nevertheless, the core consumer prices, which exclude fresh food products, decreased by 0.4%, and are worse than the market expectations of 0.3%. The inflation rate of japan was at an average of 3.07% from 1958 to 2016, reaching its highest rate at 25% in February 1974, and its lowest rate at -2.52% in October 2009. Year after year, the food prices increased by 3.6%, and a 2.3% increase specifically in October.It is the highest increase for food prices since March 2015 which was raised by 21.6% on fresh food cost. On the other hand, prices declined 5.8% for fuel, water and electricity charges. Also, it decreased by 1.5% for transportation and communication, and declined by 0.2% for housing. In conclusion, in Tokyo, the capital city of Japan, the consumer prices remained constant yet experienced a gain of 0.5% in November as stated above. The core consumer prices experienced a 0.4% decline, less than the expected one.
