After escaped from six years of deflation (line 9), the rate of inflation in Japan is 0.25%. However, the inflation rate of Japan is only two to three percent annually. It could be categorized as low compared with the other developed country such as Australia.

In addition, Japan faced a problem of sluggish in consumer spending. This is cause by demographic condition in Japan (line 27). To increase an inflation rate, the government has to find a way to increase the level of aggregate demand for local product, It could be done by applying demand-pull inflation . To increase the consumer spending and inflation rate, demand-pull inflation has to be chosen.
If cost-push inflation is applied, it will worsen the problem of sluggishness in domestic goods demand as the price of goods rises.

Japan should adopt discretionary fiscal policy to increase Aggregate Demand (AD) for domestic goods. Lowering tax for domestic goods will encourage Japanese citizen to spend more; hence AD in......

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Title: Ib Economic Hl Commentary
Approximate Word Count: 775
Approximate Pages: 4 (250 words per double-spaced page)

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