Working Paper: NBER ID: w27332
Authors: Takeo Hoshi; Anil K. Kashyap
Abstract: We take some well-known observations about the structure of the Japanese labor market and add new evidence about how it has evolved to study inflation in Japan. Our key finding is that labor market dynamics shifted after 1998 so that correlations between labor market tightness and wages weakened noticeably. This change was accompanied in a break in the relationship between wages and prices, so wage inflation has become a much less important determinant of price inflation.
Keywords: Inflation; Labor Market; Wages; Japan
JEL Codes: E31; E50; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor market tightness (J20) | Wage inflation (J31) |
| Wage inflation (J31) | Price inflation (E31) |
| Bonus inflation (E31) | Price inflation (E31) |
| Lagged price inflation (E31) | Price inflation (E31) |