Japan’s basic consumer prices are rising at the fastest pace in four decades – Copyright AFP Richard A. Brooks
Katie Forster, Mathias DINNER
Japanese inflation hit a four-decade high last month, government data showed on Friday, buoyed by high energy costs and a weak yen and mounting pressure on the central bank to back away from its ultra-loose monetary policies. .
Core consumer prices, excluding volatile fresh foods, rose 3.6 percent on-year in October, slightly above analysts’ expectations.
The reading marked the fastest pace since 1982, though it remains below the sky-high levels that have hit the United States and other countries.
Reacting to the data, Chief Cabinet Secretary Hirokazu Matsuno told reporters that the government “must protect people’s livelihoods from these price increases.”
“Price increases have continued for items closely related to daily life, such as utilities and food, due to rising commodity prices and a weak yen,” he said.
The government said last month it would spend $260 billion on an economic stimulus package that includes support for energy bills, which have skyrocketed since Russia’s invasion of Ukraine in February.
“Policies targeting energy and food, which are the main causes of high prices,” are included in the relief measures, said Matsuno, who vowed to “approve the additional budget as soon as possible.”
Darren Tay, a Japanese economist at Capital Economics, told AFP that the impact of inflation on the average consumer is “very real.”
Prime Minister Fumio Kishida responded with an “aggressive” stimulus package because he “knows that his constituency is not very happy with the price hikes,” Tay added.
– Economy ‘on shaky foundations’ –
When energy prices are not taken into account, October inflation was 2.5 percent more moderate, but still higher than September.
The main core consumer price index (CPI) has now risen for 14 consecutive months, putting pressure on the Bank of Japan to revamp its long-standing monetary easing policies.
The US Federal Reserve and other central banks have raised interest rates dramatically this year to deal with inflation.
But Japan, which since the 1990s has oscillated between periods of slow inflation and deflation, has gone against the grain, continuing to keep interest rates ultra-low as it tries to revive the sluggish economy.
Although inflation is now higher than the two percent predicted by the Bank of Japan over the past decade, he views the recent price increases as temporary and says there is no reason to change course.
The markedly different approaches taken by the BoJ and the Fed have reduced the value of the yen against the dollar this year from levels of around 115 yen to the dollar in March to 140 on Friday, after hitting a 32-year low of 151 yen. last. month.
But as the bank keeps a close eye on inflation, Tay added: “I still don’t think it’s enough for them to change their policy right now.”
One reason is that Japan’s latest growth data, released on Tuesday, showed a surprise contraction in the world’s third-largest economy in the July-September quarter.
“That shows the bank very clearly that the economy is on a much shakier footing than they might otherwise have expected,” Tay said.
“The other thing is that the global economy will probably go into recession next year, in the first half,” he added.
“Basically we are seeing very weak economic conditions overall, and the Bank of Japan will not risk jeopardizing the economy further by tightening monetary policy at this point.”