Michael Mouat: Japan has gone its own way on fighting inflation - can NZ learn from a global outlier?

Like most countries over the past three years, New Zealand has tried to manage inflation by increasing interest rates. Japan, on the other hand, has taken a different tack – with clear success.

In 2016, the Bank of Japan (BoJ) set the country’s interest rate at -0.1% and left it there. During the same period, the Reserve Bank of New Zealand (RBNZ) has adjusted the interest rate 18 times, with 12 upward adjustments since the end of 2021.

Japan’s annual inflation rate peaked at 4.4% in January 2023, while New Zealand’s peaked at 7.3% in June 2022, before dropping to 6.0% in June this year.

What might explain these differences in interest rate policy and inflation outcomes? The answer begins with how Japan views inflation in the first place.