The End of Abenomics: Inflation returns to Japan after decades of stagnation

The End of Abenomics: Inflation returns to Japan after decades of stagnation

Japan Wakes Up: Is the Return of Inflation a Blessing or a Curse? Decades of Chronic Stagnation For decades, Japan suffered from “chronic stagnation” and “deadly inflation” where stagnant prices held back consumption and investment. The government and central bank used ultra-loose fiscal and monetary policies to stimulate the economy, to no avail. Central banks bought government bonds in massive quantities, and interest rates remained near zero or negative, but businesses and households remained reluctant to spend. The result: government debt exceeding 260% of GDP and an economy trapped in a vicious cycle of stagnation. The Sudden Shift However, the picture is now changing, as the Japanese economy is experiencing a significant return of inflation for the first time in three decades. Prices are rising, wages are moving, and the yen is falling to its lowest level against the dollar since 1990. Economic analysis raises a crucial question: Is this a sign of a final recovery or the beginning o…