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gettyIf ever there were an economic example of the dog that caught the car and has no idea what to do now—it’s Japan, circa 2024.
For 25 years now, a succession of leaders tried—and largely failed—to defeat deflation and produce sustained inflation. This goes, too, for Prime Minister Fumio Kishida, who on Wednesday announced he won’t seek another term at the top of Japan’s ruling Liberal Democratic Party.
Sure, inflation appeared on Kishida’s watch (he took office in October 2021). But it wasn’t Kishida who produced inflation above Japan’s 2% target — it was Vladimir Putin.
Russia’s Ukraine invasion drove up energy and food prices, on top of the ways in which post-Covid supply-chain chaos boosted costs. That had Japan importing commodities at wildly elevated prices via a currency that lost a third of its value in the previous decade.
It’s what economists call “bad” inflation. Since the late 1990s, Japan had been trying to generate “demand pull” inflation driven by rising demand that fuels wage gains. What it got instead was the “cost push” kind that cuts household purchasing power and undermines business confidence.
All this explains why a critical mass of Japan’s 125 million people are hating the inflation government leaders told them they desired.
Kishida’s decision to bow …
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