In the U.S., unemployment insurance benefits, which are paid directly to individual workers, play an important role. In Japan, employment adjustment subsidies, which cover firms' wage payments, help firms hoard labor even during a recession. 2  The differences in labor market dynamics have affected developments in the inflation rates (Chart 4).
In the U.S., the year-on-year rate of change in the CPI recently has been high, exceeding 5 percent for the first time in 30 years. On the other hand, in Japan, it has been only about 0 percent. That said, the recent low inflation rate in Japan is mainly due to unusual factors such as a significant reduction in mobile phone charges.