Prior to the pandemic Japan struggled to generate a sustainable inflation trend.

The annualised rise in the price level as captured by PriceStats was only 0.4% yoy; a level low enough to be peppered with bouts of outright deflation.

Since 2021, however, there has been  a clear structural break. A clear inflation mindset has returned. The trend growth in the Japanese price level since this point has been comfortably above 2%, and if anything is currently showing signs of accelerating not fading.

The implication is that Japan’s inflation trend has shown a lasting change, but monetary policy settings have barely moved from the deflationary era, yet.