Research Programs: International Macroeconomics

Long-term Deflation in Japan: Its causes and policy implications

Project Leader/Sub-Leader

WATANABE Tsutomu (Faculty Fellow)



Prices have continued to fall in Japan over a lengthy period of more than 10 years. This project will use microeconomic price data to elucidate the mechanisms of long-term deflation in Japan and consider what measures are needed to break free from this deflation. Until now, price research has mainly used aggregate statistics such as consumer prices. However, there are limits to analysis using aggregate statistics. In this project, we will analyze firms' price-setting behavior in detail at the microeconomic level, and this will serve as the starting point for approaching the dynamics of price fluctuation at the macroeconomic level. Instead of treating long-term deflation as a simple monetary phenomenon, we will treat it as a phenomenon deeply related to real aspects of the economy (i.e., long-term stagnation of the real economy).

June 21, 2011 - March 31, 2013

Major Research Results


RIETI Discussion Papers