Discussion Paper

Inflation and Japan's Ever-Tightening Labor Market

Abstract: Japan offers a preview of future U.S. demographic trends, having already seen a large increase in the population over 65. So, how has the Japanese economy dealt with this change? A look at the data shows that women of all ages have been pulled into the labor force and that more people are working longer. This transformation of the work force has not been enough to prevent a very tight labor market in a slowly growing economy, and it may help explain why inflation remains minimal. Namely, wages are not responding as much as they might to the tight labor market because women and older workers tend to have lower bargaining power than prime-age males.

Keywords: Japan; inflation; unemployment rates; vacancies; demographics; labor force; working-age population;

JEL Classification: E2; F00; E5;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2016-11-14

Number: 20161114