Japanese Monetary Policy

Japan stands out among the major economies of the world for many reasons. Not least among them should be its monetary achievements of the last decade. In the middle seventies, Japan experienced inflation as high as 20%. As late as 1980, consumer prices rose by 8%. Inflation rates now range between zero and 3%, depending on the broad measure of inflation chosen. Of greater significance for the rest of the world is the fact that wages and salaries rose less than productivity, so that unit labor costs fell by 5% in 1984 for the second year in a row. If the annual spring labor offensive results in money wage increases of about 5 1/2% or less, as now seems probable, unit labor costs will decline again in 1985. Japan's costs of production are, therefore, likely to remain low relative to the United States.