Why is there no inflation in Japan?
Japan is characterised by a complete absence of inflation, except when there is a sharp depreciation of the yen or the Japanese government decides to hike the VAT rate. Yet a number of mechanisms should have driven up inflation in Japan: Population ageing without immigration; The energy crisis following the Fukushima disaster; The fact that Japan is a closed economy that imports little from emerging countries; The low productivity in services. The case of Japan shows that the functioning of the labour market is key to determining inflation. As long as there is wage austerity (skewing of income distribution against employees), there is no inflation even though many inflationary mechanisms appear, as those currently expected for OECD countries (population ageing, energy transition, return to regional value chains, etc.).