Is Downward Wage Flexibility the Primary Factor of Japan's Prolonged Deflation?

Sachiko Kuroda, Isamu Yamamoto

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

By using both macro- and micro-level data, this paper investigates how wages and prices evolved during Japan's lost two decades. We find that downward nominal wage rigidity was present in Japan until the late 1990s, but disappeared after 1998 as annual wages became downwardly flexible. Moreover, nominal wage flexibility may have contributed to Japan's relatively low unemployment rates. Although macro-level movements in nominal wages and prices seemed to be synchronized, such synchronicity is not observed at the industry level. Therefore, wage deflation does not seem to be a primary factor of Japan's prolonged deflation.

Original languageEnglish
Pages (from-to)143-158
Number of pages16
JournalAsian Economic Policy Review
Volume9
Issue number1
DOIs
Publication statusPublished - 2014 Jan

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deflation
nominal wage
wage
flexibility
Japan
macro level
rigidity
unemployment rate
micro level
unemployment
Factors
Wage flexibility
Wages
Deflation
industry

Keywords

  • Deflation
  • Downward nominal wage rigidity
  • Japan's lost two decades
  • Japanese labor market
  • Unit labor cost

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Management, Monitoring, Policy and Law
  • Political Science and International Relations

Cite this

Is Downward Wage Flexibility the Primary Factor of Japan's Prolonged Deflation? / Kuroda, Sachiko; Yamamoto, Isamu.

In: Asian Economic Policy Review, Vol. 9, No. 1, 01.2014, p. 143-158.

Research output: Contribution to journalArticle

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