Inflation rate in Japan 2028

In 2023, Japan had an average inflation rate estimated at 3.21 percent, marking the highest rate of inflation in Japan in almost a decade. However, this figure is still very low compared to most other major economies, such as Japan's fellow G7 members, four of which are estimated to have inflation rates exceeding eight or nine percent in 2022 due to the global inflation crisis.

Why is Japan's inflation rate lower?

There are a number of contributing factors to Japan's lower inflation rate in 2022. Japan eased its Covid restrictions more slowly than most other major economies, this prevented post-pandemic consumer spending that may have driven inflation through supply chain issues caused by higher demand. As the majority of Japan's food and energy comes from overseas, and has done so for decades, the government has mechanisms in place to prevent energy and wheat prices from rising too quickly. Because of this, Japan was able to shield its private sector from many of the negative knock on effects from Russia's invasion of Ukraine, which had a significant impact on both sectors globally.

Persistent deflation and national debt

An additional factor that has eased the impact of inflation on Japan's economy is the fact that it experienced deflation before the pandemic. Deflation has been a persistent problem in Japan since the asset price bubble burst in 1992, and has been symptomatic of Japan's staggering national debt thereafter. For almost 30 years, a combination of quantitative easing, low interest rates (below 0.5 percent since 1995, and at -0.1% since 2016), and a lack of spending due to low wages and an ageing population have combined to give Japan the highest national debt in the world in absolute terms, and second highest debt in relation to its GDP, after Venezuela. Despite this soaring debt, Japan remains the third-largest economy in the world, behind only the U.S. and China.