Japan is facing significant economic challenges, including stagflation, driven by rising prices and declining production.
Stagflation and Inflation in Japan
According to Bloomberg analysts, Japan has officially entered a state of stagflation — a combination of rising costs and slowing output that has not been seen this severely in decades.
The price of rice shot up 98.4% year-over-year in April, marking the fastest spike since 1971. Meanwhile, energy costs increased by 9.3% after government subsidies for gas and electricity were phased out in March.
Economic Decline and Its Consequences
The consumer price index, excluding fresh food, jumped 3.5% compared to last year, up from 3.2% in March. This marks the fifth straight month that inflation has exceeded 3%. Meanwhile, Japan's GDP fell by 0.7% in the first quarter of 2025, the first decline since early 2024. Economist Toru Adachi commented, "Japan is having its own version of stagflation. Consumer spending isn't robust enough to support a moderate recovery."
Trade Talks and External Factors
Trade negotiations with the U.S., particularly regarding tariffs, are raising serious concerns in Japan. Commerce Secretary Howard Lutnick stated that deals with Japan and South Korea would take significantly more time than the agreement reached earlier with the UK. He added, "These are not going to be fast deals." Economist Seiji Shinke highlighted that a major risk comes from U.S. policy. "The chance of recession cannot be denied," he said.
Japan faces a complex economic situation, and forecasts for the future remain uncertain. In the context of stagflation and decreasing GDP, the government faces the challenge of stimulating the economy and maintaining citizens' living standards.
