e and household sectors, and the output gap has improved substantially. Corporate profits are at record highs. The unemployment rate has fallen to less than 3 percent, meaning that Japan has almost achieved full employment (Chart 8). Wages are rising moderately with the tightening of labor market conditions. An especially noteworthy change is that the practice of regular increases in base pay, which had disappeared during the prolonged deflation since the second half of the 1990s, has returned and has now been observed for the fourth consecutive year. A virtuous cycle between rising inflation and wage increases has been operating. In other words, Japan is no longer experiencing deflation in the sense of a sustained decline in prices.
to be continued