📉 Since 2013, Japan has deliberately tried to push its prices up. Now the minister in charge of economic and fiscal policy, himself long seen as a reflationist, says that phase has ended.

What reflation meant

Reflation is the idea that a country stuck in deflation, where prices keep falling, can climb out by putting more money into circulation and pushing prices up on purpose. In Japan it sat at the heart of Abenomics. Prime Minister Shinzo Abe's government called its plan the "three arrows": bold monetary policy, flexible fiscal policy, and a growth strategy to spur private investment.

The Bank of Japan fired the first arrow. On April 4, 2013, it launched "quantitative and qualitative monetary easing," aiming to hit 2% inflation as early as possible, with about two years in mind. That easing, which flooded markets with money and dragged interest rates down, ran in changing forms for more than a decade.

The numbers ended it first

On March 19, 2024, the BOJ ended its negative interest rate policy, under which it charged banks for parking part of their money at the central bank. It kept raising rates after that. On September 18, 2026, it lifted its policy rate, the target for short-term borrowing costs, from the 1.0% set in June to 1.25%. The Nikkei newspaper called it the highest in 31 years.

The vote was 7-2. The two dissenters, board members Toichiro Asada and Ayano Sato, were appointed by Prime Minister Sanae Takaichi's government and are seen as reflationists (how they got the job). According to the BOJ's statement, Asada argued for holding, since inflation was below 2% and the economy was not clearly strong.

The bond market points the same way. On September 25, the yield on Japan's 10-year government bond, the benchmark for long-term rates, briefly hit 3.115%. Jiji Press says that was the highest since August 1996, about 30 years.

Why a reflationist, and why now

The speaker was Minoru Kiuchi, Minister of State for Economic and Fiscal Policy, who also handles Japan's growth strategy among other portfolios. He kept his post in the cabinet reshuffle of September 17, 2026. The Nikkei reports that he sees himself as the person who coined "responsible and proactive fiscal policy," the Takaichi government's signature slogan. Bloomberg says he had been seen as a reflationist who favors both monetary easing and fiscal expansion.

At a press conference after the September 25 cabinet meeting, Kiuchi said the phase of reflation in the Abenomics sense, meaning loose money plus flexible government spending, "is over." Japan is now in a period of gently rising prices and rising interest rates, he explained. He added that the Takaichi government's economic and fiscal management is not a reflation policy either.

On September 1, just over three weeks before Kiuchi spoke, after a G20 meeting of finance ministers and central bankers in Asheville, North Carolina, U.S. Treasury Secretary Scott Bessent told reporters that Abenomics had worked and that Japan should "stop the reflation." The next day, Chief Cabinet Secretary Minoru Kihara declined to comment on remarks by foreign officials and said the government's "responsible and proactive" fiscal stance was unchanged. Whether Kiuchi's remark was a response to that request cannot be read from the reports.

Who said it, and how official is it

Monetary policy in Japan is set by the BOJ's nine-member Policy Board, not by ministers. Article 19 of the Bank of Japan Act lets the finance minister and the economic and fiscal policy minister attend policy meetings, state opinions, submit proposals, and ask for a vote to be postponed. Kiuchi can sit at that table, but he has no vote.

His remark was his own view, given at a press conference. It is not an official document like a cabinet decision. As of September 26, the Cabinet Office had not posted the transcript, and the exact wording differs slightly across news reports.

Among the government's official positions, Japan has still not declared an end to deflation. According to Reuters, Kiuchi said at the same press conference that the government has not made that declaration because it cannot yet judge that deflation will not return. In August, consumer prices excluding fresh food rose 1.7% from a year earlier, below the BOJ's 2% target.

So the reflation phase is declared over, while the goal reflation was meant to achieve, escaping deflation, is officially still unfinished.

After the words caught up

Major central banks in the U.S. and Europe are heading the same way. The U.S. Federal Reserve raised its target range to 3.75% to 4.00% on September 16. According to Jiji Press, the European Central Bank also raised rates in September.

A line of policy that began in 2013 has now been given a closing sentence by the minister in charge. How those words will change budgets, or the government's relationship with the BOJ, was still unclear as of September 2026.

When your country's monetary policy changes direction, who says it first: the government, or the central bank?

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