Understanding Persistent Deflation in Japan

2016 Fiscal Year Final Research Report

• Project/Area Number: 24223003
• Research Category: Grant-in-Aid for Scientific Research (S)
• Allocation Type: Single-year Grants
• Research Field: Economic theory
• Research Institution: The University of Tokyo
• Principal Investigator: WATANABE Tsutomu 東京大学, 大学院経済学研究科(経済学部), 教授 (90313444)
• Co-Investigator(Kenkyū-buntansha): 青木 浩介 東京大学, 経済学研究科(研究院), 准教授 (30263362) ; 阿部 修人 一橋大学, 経済研究所, 教授 (30323893) ; 中嶋 智之 京都大学, 経済研究所, 教授 (50362405)
• Co-Investigator(Renkei-kenkyūsha): ABE Naohito 一橋大学, 経済研究所, 教授 (30323893) ; SHIOJI Etsuro 一橋大学, 大学院経済学研究科, 教授 (50301180) ; NAKAJIMA Tomoyuki 京都大学, 経済研究所, 教授 (50362405) ; HIROSE Yasuo 慶応義塾大学, 経済学部, 教授 (50583663) ; TOMURA Hajime 早稲田大学, 政治経済学術院, 准教授 (90633769)
• Project Period (FY): 2012-05-31 – 2017-03-31
• Keywords: デフレーション / 金融政策 / 流動性の罠

Outline of Final Research Achievements

Japan has experienced more than two decades of deflation. While this deflation has been relatively mild, with prices falling at an annual rate of only around 1 percent, a key characteristic is that it has been extremely prolonged. The reason for this prolonged deflation is firms' price setting behavior: firms leave the prices they charge unchanged even if their costs change. Whereas in other advanced economies such as the United States, the default is to raise prices every year by 1-2 percent, the default in Japan since the late 1990s has been to leave prices unchanged. This is due to a change in social norms with regard to price and wage increases. On the other hand, on the household side, there is a strong expectation - especially among the young, who since their birth have only known deflation - that deflation will continue in the future, which makes it difficult to overcome deflation.

Free Research Field

マクロ経済学