TOKYO (REUTERS) - Prime Minister Shinzo Abe said on Monday jan 4) that Japan was exiting deflation and pledged that his government and the central bank would work together to completely defeat it.
Whether Japan can accelerate inflation would depend on capital expenditure and wage growth, Mr Abe said, maintaining his moral suasion on corporate Japan to make the investment needed to sustain a virtuous cycle of consumption and growth.
"The economy is firmly on a recovery path," Abe told a news conference. "We are still half way but we have created a situation that is no longer seen as deflation."
When later asked whether such statement may be taken as hasty judgment on deflation, Mr Abe said Japan has still not completely conquered deflation even though the Bank of Japan's aggressive monetary stimulus has reversed prices to "uptrend".
"As BOJ Governor (Haruhiko) Kuroda says he will do whatever he can, the government and the BOJ will work as one to do the utmost to defeat deflation," Mr Abe added.
Japan's core consumer inflation was 0.1 per cent in the year to November, rising for the first time in three months, underlining Japan's uphill struggle to foster price growth in the face of tumbling oil prices.
Given the risk of Japan's consumer prices falling back into decline, the government has not yet declared that deflation has been completely eradicated.
Mr Abe said he would make Japan's presence in global diplomacy more widely recognised as he chairs this year's Group of Seven summit in May and plans for a trilateral summit with China and South Korea this year.
He also said he would raise with G7 peers the issues facing the global economy, including rising uncertainty, the fight against terrorism, and challenges for the Asia-Pacific region.