Bank of Japan Gov. Kazuo Ueda assures that Japan's economy is expected to steer clear of deflation, even as pressure from higher import prices begins to ease. Speaking at a business gathering in Nagoya, near Toyota Motor's headquarters, Ueda emphasized that the country's inflation rate is unlikely to return to pre-pandemic levels of 0% to 1%. This is primarily because the virtuous cycle between wages and prices is anticipated to strengthen.
Inflation Projections
According to the Bank of Japan's quarterly outlook report, consumer prices, excluding fresh food, are projected to rise by 2.8% in the year ending March 2025 and by 1.7% in the subsequent year. This signifies a positive outlook for sustained economic growth.
Wage Hikes for Smaller Firms Remain Uncertain
Despite the positive economic outlook, Ueda highlights the uncertainty surrounding wage increases for smaller companies in the coming year. While some of these firms managed to provide raises this year despite low profitability, it remains unclear whether they will be able to do so again in the future.
As the country continues its journey towards economic stability, Japan's efforts to avoid deflation and promote sustainable growth seem promising.
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