Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-27T10:41:37.586Z Has data issue: false hasContentIssue false

7 - The Great Disconnect

The Decoupling of Wage and Price Inflation in Japan

from Part III - Macroeconomic Policy

Published online by Cambridge University Press:  05 February 2021

By
Takeo Hoshi  and
Anil K Kashyap
Edited by
Takeo Hoshi  and
Phillip Y. Lipscy
Takeo Hoshi
Affiliation:
University of Tokyo
Phillip Y. Lipscy
Affiliation:
University of Toronto
Get access

Summary

This chapter takes some well-known observations about the structure of the Japanese labor market and adds new evidence about how it has evolved to study inflation in Japan. Our key finding is that labor market dynamics shifted after 1998 so that correlations between labor market tightness and wages weakened noticeably. This change was accompanied by a break in the relationship between wages and prices, so wage inflation has become a much less important determinant of price inflation.

Keywords

Phillips curveprice inflationwage inflationdual labor marketfull-time workerspart-time workersregular wagesbonusesMonthly Labor Survey
Type
Chapter
Information
The Political Economy of the Abe Government and Abenomics Reforms , pp. 170 - 199
Publisher: Cambridge University Press
Print publication year: 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abe, Masahiro, and Hoshi, Takeo. 2007. “Corporate Finance and Human Resource Management in Japan.” In Corporate Governance in Japan: Institutional Change and Organizational Diversity, edited by Aoki, Masahiko, Jackson, Gregory, and Miyajima, Hideaki, pp.257–281. Oxford: Oxford University Press.Google Scholar
Arai, Yoichi, and Hoshi, Takeo. 2006. “Monetary Policy in the Great Stagnation.” In Japan’s Great Stagnation: Financial and Monetary Policy Lessons for Advanced Economies, edited by Hutchison, Michael and Westermann, Frank, pp.157–181. Cambridge, MA: MIT Press.Google Scholar
Bank of Japan. 2016. “Comprehensive Assessment: Developments in Economic Activity and Prices as well as Policy Effects since the Introduction of Quantitative and Qualitative Monetary Easing (QQE).” Tokyo: Bank of Japan. www.boj.or.jp/en/announcements/release_2016/k160921b.pdf.Google Scholar
Bank of Japan, 2017, “Outlook for Economic Activity and Prices (July 2017).” Tokyo: Bank of Japan.Google Scholar
Bernanke, Ben S. 2003. “Some Thoughts on Monetary Policy in Japan.” Remarks before the Japan Society of Monetary Economics, Tokyo, Japan, May 31, 2003. Available at: www.federalreserve.gov/boarddocs/speeches/2003/20030531/.Google Scholar
Bernanke, Ben S. 2000. “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” In Japan’s Financial Crisis and Its Parallels to U.S. Experience, edited by Mikitani, Ryoichi and Posen, Adam, pp.149–166. Washington, DC: Institute for International Economics.Google Scholar
Bernanke, Ben S. 2017. “Some Reflections on Japanese Monetary Policy.” Ben Bernanke’s Blog, Brookings Institution, May 23, 2017.Google Scholar
Cecchetti, Stephen G., Feroli, Michael, Hooper, Peter, Kashyap, Anil K, and Schoenholtz, Kermit. 2017. “Deflating Inflation Expectations: The Implications of Inflation’s Simple Dynamics.” Working paper. University of Chicago.Google Scholar
Gagnon, Joseph E. 2017. “There Is No Inflation Puzzle – Japan Edition.” Realtime Economics Watch, Peterson Institute for International Economics. https://piie.com/blogs/realtime-economic-issues-watch/there-no-inflation-puzzle-japan-edition.Google Scholar
Genda, Yuji. 2017. Hitode-busoku na no ni naze chingin ga agaranai no ka (Why are wages not rising despite the shortage of labor?). Tokyo: Keio University Press.Google Scholar
Hamada, Koichi, Kashyap, Anil K, and Weinstein, David E.. 2011. “Introduction.” In Japan’s Bubble, Deflation and Long-Term Stagnation, edited by Hamada, Koichi, Kashyap, Anil K, and Weinstein, David E., pp.1–16. Cambridge, MA: MIT Press.Google Scholar
Hayami, Masaru. 2002. “Revitalizing the Japanese Economy.” Speech at the Keizai (Economic) Club, January 29, 2002. www.boj.or.jp/en/announcements/press/koen_2002/ko0201a.htm/.Google Scholar
Hoshi, Takeo, and Kashyap, Anil K. 2020. “The Great Disconnect: The Decoupling of Wage and Price Inflation in Japan.” NBER Working Paper 27332.CrossRefGoogle Scholar
International Monetary Fund. 2012. “Japan: 2012 Article IV Consultation.” IMF Country Report No. 12/208. Washington, DC.CrossRefGoogle Scholar
Ito, Takatoshi, and Mishkin, Frederic S.. 2006. “Two Decades of Japanese Monetary Policy and the Deflation Problem.” In Monetary Policy with Very Low Inflation in the Pacific Rim, edited by Ito, Takatoshi and Rose, Andrew, pp.131–193. Chicago, IL: NBER-University of Chicago Press.Google Scholar
Kimura, Takeshi, Kobayashi, Hiroshi, Muranaga, Jun, and Ugai, Hiroshi. 2003. “The Effect of the Increase in the Monetary Base on Japan’s Economy at Zero Interest Rates: An Empirical Analysis.” In BIS Papers No. 19 (Monetary Policy in a Changing Environment), pp.276–312.Google Scholar
Kuroda, Haruhiko. 2017. “The Role of Expectations in Monetary Policy: Evolution of Theories and the Bank of Japan’s Experience.” Speech at the University of Oxford, June 8, 2017. www.boj.or.jp/en/announcements/press/koen_2017/ko170609a.htm/.Google Scholar
Kuttner, Kenneth, and Posen, Adam, 2001, “The Great Recession: Lessons for Macroeconomic Policy from Japan.” Brookings Papers on Economic Activity 2: 93–185.Google Scholar
Kuttner, Kenneth, Iwaisako, Tokuo, and Posen, Adam. 2015. “Monetary and Fiscal Policies During the Lost Decades.” In Examining Lost Decades, edited by Funabashi, Yoichi and Kushner, Barak, pp.17–36. London: Routledge.Google Scholar
Miyao, Ryuzo. 2000. “The Role of Monetary Policy in Japan: A Break in the 1990s?” Journal of the Japanese and International Economies 14: 366–384.Google Scholar
Muto, Ichiro, and Shintani, Kohei. 2020. “An Empirical Study on the New Keynesian Wage Phillips Curve: Japan and the US.” B.E. Journal of Macroeconomics 20(1).Google Scholar
Shirakawa, Masaaki. 2011. “Toward a Revitalization of Japan’s Economy.” Speech at the Foreign Correspondents’ Club of Japan, February 7, 2011. www.boj.or.jp/en/announcements/press/koen_2011/ko110207a.htm/.Google Scholar
Svensson, Lars E. O. 2003. “Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others.” Journal of Economic Perspectives 17(4): 145–166.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×