2043, ECB, April; and Sestito, P. and Viviano, E. (2016), “Hiring incentives and/or firing cost reduction? Evaluating the impact of the 2015 policies on the Italian labour market”, Questioni di economia e finanza (Occasional Papers), No. 325, Banca d’Italia, March. 32 As measured by the VIX index (ECB calculations).
This resulted in a vicious cycle: the income situation of households deteriorated due to a decrease in wages, restrained consumption led to a decline in firms' sales, and firms had no choice but to adjust their employment. The serious appreciation of the yen under deflation also caused prolonged deflation.