Perhaps the biggest reason why Japanese wage increases and inflation remain so low is that the country’s employees and employers believe they will stay that way, and act accordingly.
BOJ Governor Kuroda said at a press conference on June 15 that an entrenched “deflationary mindset” in Japanese companies and households creates a unique challenge to stoke inflation, as such attitudes don’t exist in the U.S. or Europe.
And Powell wants to keep it that way. It’s “very important” that inflation expectations remain well anchored at the Fed’s 2 percent target and not fall below it, he said.
That may be why he’s willing to risk comparisons to the Great Inflation era about a half century ago by accepting a jobless rate below 4 percent.
This article was provided by Bloomberg News.