Japan is redefining deflation, but not as we know it
TOKYO, March 13 (AFP) -
The Japanese government is reviewing its somewhat opaque definition of deflation, an official said Tuesday as the domestic economy continued to struggle to shake off the spectre of recession.
But the official denied press reports that the new definition would be a "situation in which prices fall for two years or more," a concept recognised by the International Monetary Fund (IMF) and other global bodies.
Japan has officially described deflation as a "state in which prices are falling while the economy is receding," since 1999 when the government used this definition in a report on prices.
But the ambiguity has given rise to differences of opinion within government on the trend of price levels.
Shizuka Kamei, policy chief of the ruling Liberal Democratic Party (LDP), said on television last Sunday that the Japanese economy had fallen into a "state of emergency and deflation."
That view has been echoed by Taro Aso, the state minister in charge of economic and fiscal affairs as the ruling coalition and the government advocated more stimulus spending.
"We are reviewing the definition of deflation," said Toshubumi Akaushi, an official in charge of economic trend and policy analysis at the Cabinet Office. "But we have not yet decided on a new definition."
Akaushi denied that the length of time over which prices keep falling would serve as a yardstick for deflation. "We will make a comprehensive assessment focused on the extent of price falls."
Asked if the Japanese economy was in a state of deflation, he said: "We cannot say anything definitive at working level."
The influential Asahi Shimbun newspaper reported Tuesday that the state minister in charge of economic and fiscal affairs would announce the new definition of deflation at a cabinet meeting on Friday.
Aso will spell out that deflation means a state of the economy in which prices keep falling for two years or more, the daily said.
The new defintion will also separate deflation from the concept of recession -- a period of the business cycle that shows a downswing or contraction of the economy -- the Jiji Press news agency said.
As a result, the government can have a stronger case in calling on the Bank of Japan for further credit easing as it can argue that the central bank, primarily charged with stabilising prices, has a mandate to fight deflation as well as inflation, Jiji said.