The rise in consumer prices in Japan has reached a record level since 1982, against a background of a fall in the yen against the dollar which increases the cost of imports and soaring energy prices.
Inflation in Japan stood at 3.6% in October over one year (excluding fresh products), according to data published on Friday, slightly above what the consensus of economists polled by the Bloomberg agency expected. (3.5%), after 3% in September.
Without taking energy into account, inflation was more moderate (2.5%), while also being stronger there than in September due to the increase in the prices of other products, notably food.
Inflation in the archipelago has exceeded the Bank of Japan’s target since April (2% excluding fresh produce), under the effect of soaring energy and food prices in the context of the Russian-Ukrainian war.
But this “cost inflation” – which remains at moderate levels compared to other industrialized countries – does not satisfy the BoJ, which continues to believe that the conditions are not yet in place for monetary tightening in Japan.
– Global recession on the horizon –
At the end of October, the institution raised its inflation forecast to +2.9% for the 2022/23 financial year which will end at the end of March (+1.8% excluding fresh produce and energy), but it sees it fall back to 1.6% in 2023/24 and remain at this level in 2024/25.
The BoJ reiterated on this occasion that we should “not expect interest rate hikes or an end to monetary easing anytime soon”, adding that it intended “to conduct its monetary policy in such a way that the stability of price is achieved in a lasting and stable manner, accompanied by wage increases”.
Fears of a global recession in 2023, which is also expected to hit Japan, support the Bank on its path, according to Darren Tay of Capital Economics.
“We are heading towards a difficult economic situation and the BoJ is not going to risk putting the (Japanese) economy in further danger by tightening its monetary policy,” he told AFP.
This large gap between the BoJ’s ultra-accommodative monetary policy and the tightening observed in other countries, led by the United States, has resulted in the yen falling against the dollar, thus increasing the cost of Japanese imports.
Japan’s trade deficit weighed on gross domestic product (GDP) in the third quarter, which fell 0.3% from the previous quarter, according to preliminary figures released on Tuesday.
– “Protect the population” –
To stimulate the economy and try to protect the purchasing power of the Japanese, the government of Prime Minister Fumio Kishida announced at the end of October a massive recovery plan of an amount equivalent to 270 billion euros.
While “the prices of goods and services of daily life, such as energy and food, continue to increase (…) the government must protect the population from these increases”, declared Friday the spokesman of the Hirokazu Matsuno government.
With the rise of the yen observed since the beginning of November and the downward trend in world energy prices, the rise in prices should slow from the fourth quarter, according to some economists, thanks in particular to one of the measures of the Kishida plan. expected to reduce Japanese energy bills in January.
“We expect inflation to peak around 3.5% in the fourth quarter and slow to 2.8% in the first quarter of 2023,” commented Yuki Masujima of Bloomberg Economics.