NEW YORK ¨C Maybe it¡¯s time to stop dismissing the risk of stagflation in Japan.
I¡¯ve raised this risk a couple of times during the last 12 months as inflation rose without commensurate increases in wages or productivity. But Tuesday¡¯s ugly gross domestic product report suggest it¡¯s a clear and present threat to Japan¡¯s best chance at economic recovery in more than a decade.
The collective reaction Tuesday to the 6.8 percent plunge in second-quarter growth seemed to be: ¡°Relax, it could¡¯ve been worse.¡± After all, many economists were braced for a 7 percent-plus contraction following an ill-timed and ill-conceived consumption-tax increase in April. Yet the detail of the report ¡ª and the balance of other recent data ¡ª point toward a period of sluggish growth, at best, and continued inflation gains.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.