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In a recent interview with the Financial Times, Japanese Minister of Finance Katsunobu Kato mentioned that Japan had yet to combat deflation despite rising consumer prices and a surge in wages. 
Kato explained that the seemingly positive trends in the consumer markets were not enough to declare Japan free of deflation. The finance minister also insisted that the government would only consider deflation to be over when there were no more prospects of reverting to the trend.&nbsp; 
Kato further <a href="https://www.ft.com/content/7a6f5482-4fef-4557-bd11-e25b180aa6ac" rel="nofollow noopener" target="_blank">mentioned</a> that the government needed to explore other underlying prices in the Japanese economy and their background to establish a comprehensive outlook of the country’s deflation situation. The finance minister added that the ministry’s current judgment of the situation was that Japan was not over deflation yet.&nbsp; 
Japan began experiencing chronic deflation in the late 1990s and has been combating the economic condition over the past 25 years. The Bank of Japan’s Deputy Governor Uchida Shinichi explained in a report last year that the persistent deflation involved zero or negative changes in consumer prices in the country. Shinichi further highlighted that the declining and aging population, a burst in the asset bubble, demand shortage, plunging natural interest rate, declining inflation, and more were some of the main reasons behind the chronic deflation experienced in the country.&nbsp; 
The government and the <a href="https://www.cryptopolitan.com/boj-maintains-steady-interest-rates/">BOJ</a> have worked toward strategies to raise inflation rates over the years, including the recently reintroduced interest rate hikes. The Japanese central bank resumed rate hikes in March last year for the first time in 17 years, shifting the country’s monetary policies from the radical easing strategies set by the previous BOJ Governor, Haruhiko Kuroda. Kuroda’s policies had set negative interest rates while bumping asset purchases.&nbsp; 
The current BOJ Governor, Kazuo Ueda, began rate hikes up to around 0%-0.1% in March last year. In January this year, the Japanese central bank also implemented the most recent short-term interest rates to 0.5%.&nbsp; 
<h3 id="span-style-font-weight-400-japanese-finance-minister-warns-against-the-illusion-of-inflation-span">Japanese finance minister warns against the illusion of inflation</h3> 
Kato’s negative outlook on Japanese deflation mirrored speculations that the rising consumer prices highlighted the wrong side of the country’s inflation. Japan’s inflation has hovered above the BOJ’s target of 2% since 2022. Food inflation has so far been the greatest contributor to the rising inflation in the country.&nbsp; 
<figure id="attachment_698813" aria-describedby="caption-attachment-698813" style="width: 100%" class="wp-caption alignnone">
 <img decoding="async" class="size-full wp-image-698813" src="https://www.cryptopolitan.com/wp-content/uploads/2025/03/Japanese-CPI-data.jpg" alt="" width="1020" height="718" srcset="https://www.cryptopolitan.com/wp-content/uploads/2025/03/Japanese-CPI-data.jpg 1020w, https://www.cryptopolitan.com/wp-content/uploads/2025/03/Japanese-CPI-data-300x211.jpg 300w, https://www.cryptopolitan.com/wp-content/uploads/2025/03/Japanese-CPI-data-768x541.jpg 768w" sizes="(max-width: 1020px) 100vw, 1020px">
 <figcaption id="caption-attachment-698813" class="wp-caption-text">
 Headline, food, Supercore, and service inflation in Japan as of 2025. Source: <a href="https://www.ft.com/content/7a6f5482-4fef-4557-bd11-e25b180aa6ac" rel="nofollow noopener" target="_blank">Financial Times</a>
 </figcaption>
</figure> 
Japan’s inflation&nbsp;Core CPI in February still showed signs of showing down, rising by 3% year-on-year compared to the 3.2% in January. A Reuters report indicated that the core inflation in February was higher than expected by 2.9%, with food, petrol, and accommodation among the greatest contributors. Government spokesperson Yoshimasa Hayashi commented that the government hoped to protect consumers from extremely high prices while keeping an eye on how price trends affected consumer and business behaviors.&nbsp; 
Kato discussed the inflation and rising wages that indicated a significant turnaround in the economy. The largest Japanese trade union, Rengo, recently negotiated for an average wage increase of up to 5.46% this year, up from 5.01% last year. The finance minister still insisted that the wage increases would be required to outpace consumer price surges in the long term to maintain deflation slideback potential at a low.&nbsp; 
<h3 id="span-style-font-weight-400-japanese-economy-minister-believes-deflation-is-ending-span">Japanese economy minister believes deflation is ending</h3> 
Other government officials, including the Japanese economy minister Ryosei Akazawa, believe that the country should declare an end to deflation. Akazawa <a href="https://www.msn.com/en-us/money/economy/japan-ready-to-declare-end-to-deflation-economy-minister-says/ar-AA1ApXAP" rel="nofollow noopener" target="_blank">explained</a> that the four major indicators used to monitor deflation in the country had turned positive since the last quarter of 2024. The economy minister also hoped that the government and BOJ would work closely to achieve the central bank’s 2% inflation target.&nbsp; 
Moody’s Analytics economist Stefan Angrick still insisted that the country could not maintain the level of inflation needed at current trends despite the current CPI inflation rates. Angrick added that Kato’s comments made it hard to be confident that deflation would end. The economist also stated that the only way to maintain viable inflation rates would be to have strong domestic demand. Angrick pointed out that the current demand in Japan was weak while consumer spending remained flat, predicting that inflation would fall below 2% by 2026. 
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Japanese finance minister warns that the country has not yet dealt with deflation

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