Japan has faced decades of deflation, leading to stagnant wages and economic growth. However, there are indications that the economy may be rebounding.


A key indicator is the weighted median inflation rate, which reached 2% in September—the highest level since comparable data emerged in 2001. This increase results from rising energy and food prices and represents a broader trend of price growth across the economy. Another positive sign is the robust Japanese labor market, with record-low unemployment and rising wages, encouraging consumers to spend after years of deflation-induced wariness.


Though Japan's economy remains relatively sluggish compared to major economies like the US, China, and India, it shows signs of catching up. For instance, it grew at an annualized rate of 3.5% in Q2 2023—the fastest pace in over a year.


The US economy exhibits strong growth as well; however, inflation poses a significant concern. The Federal Reserve is increasing interest rates to contain inflation—a strategy that may slow US economic growth in the coming months. China's economy also encounters challenges such as a property market slowdown, prompting stimulus measures by its government to boost growth. India's rapidly expanding economy faces its own hurdles like rising inflation and a growing trade deficit, with the government working on solutions.


In summary, Japan's economic situation is mixed; while some recovery signs are evident, it lags behind leading economies. At its next meeting, the BOJ will likely revise its inflation forecasts upward and might consider raising long-term interest rate caps.