Why Japan Stands Virtually Alone in Keeping Interest Rates Ultralow

“In order to bring inflation in Japan down, you would have to slow demand rather sharply, and that’s tricky because demand was already sort of weak relative to other economies,” said Stefan Angrick, a senior economist at Moody’s Analytics in Japan.

While inflation pressures in the United States have been broadly distributed, in Japan they have primarily hit essentials like food and energy, for which demand is satisfied largely through imports.

Inflation in Japan (excluding volatile fresh food prices) has reached 3 percent, the government reported on Friday, the highest since 1991, excluding a brief spike related to a 2014 tax increase. But stripped of food and energy, Japanese prices in September were just 1.8 percent higher over the last year. In the United States, that number was 6.6 percent.

The reasons for the low Japanese figure are diverse and not well understood. Experts have found explanations in stagnant wages and the deleterious effects on demand from an aging, shrinking population.

Perhaps the largest contributor, however, is a public grown used to stable prices. Producer prices — a measure of inflation for companies’ goods and services — have climbed nearly 10 percent over the last year. But Japanese companies, unlike their American counterparts, have been reluctant to pass on those additional costs to consumers.

That means much of the current inflation pressure is coming from the strong dollar and supply issues affecting imports — factors outside Japan and therefore outside the Bank of Japan’s control. Under those circumstances, bank officials “know full well that driving up interest rates is not going to attenuate those price pressures — it’s just going to push up business costs,” said Bill Mitchell, a professor of economics at the University of Newcastle in Australia.

The Bank of Japan introduced its current monetary easing policy in 2013, when the prime minister at the time, Shinzo Abe, pledged strong measures to stimulate economic growth that had stagnated for decades.

Sumber: www.nytimes.com