More On Japan's Phillips Curve

When I saw these two graphs from Jason Smith, I was immediately a little wary:

It seems that the slope of the Phillips curve in Japan has decline significantly over the last few decades.

But I thought I would do some of my own calculations, so I took the same data I was using before, except now expressed as a change from twelve months ago, and found the slope and p-values over the prior five years for each year between 1992 and 2015. The results were a little different than Jason's (which is understandable given the shorter time horizon):

Interestingly, if you ignore the periods with really high p-values (1992-1997, 2003-2007, and 2015), the Phillips curve seems to have a pretty consistent slope over the previous five years. 

I'm not sure what to make of the previously mentioned periods with really high p-values except that the slope of the Phillips curve was effectively zero at those times. Basically the 2003-2007 period saw little change in inflation corresponding with consistent, high employment growth. Theoretically, I'd say this probably reflects non-cyclical changes in employment, which would mean that the Phillips curve wouldn't be seen in the data, but this explanation may not be satisfactory.

I don't know how to explain '92-'97 (which also includes the prior five years: 1987-1991), although I would note that Jason seems to have gotten a relatively high slope for this period and that the period I was most concerned with was the period directly following the great recession, in which the Phillips curve seems to have reasserted itself -- which does indeed make sense, considering the recession of 2008 was almost definitely cyclical.

My hypothesis is that Jason's slopes for the 2008-2015 period are held down by his inclusion of the Koizumi boom.

It's Alive!

Noah Smith seems to think that Japan is "an economics lab where theories go to die," notably asserting that "a tight labor market hasn't caused increasing prices. New Keynesian theory ... has failed to explain Japan's lack of inflation."

Au contraire! You see, Noah and other Phillips Curve doubters, Japan actually has an exceptionally good Phillips Curve, so unfortunately Noah Smith's eyeballing led him astray:

See that $R^2$ value? Do you see it? That's right, the Phillips Curve is alive and well in Japan, seemingly making it, at least in this case, an economics lab where theories that some people thought were discredited conspicuously come back strong.

If you don't like the scatter plot, look at the pretty awesome prediction for inflation that the linear fit gives:

Keep in mind that this prediction uses only one variable, the employment rate for people aged between 15 and 74, and it seems to work incredibly well, especially because expected inflation is nowhere to be seen (pun intended). It lives!

Update:

Same graph with core CPI instead: