Japanese inflation at its highest in four decades
Japanese inflation hit its highest level in four decades last month, government data showed on Friday, fueled by high energy costs and a weak yen and growing pressure on the central bank to move away from its ultra-accommodative monetary policies.
Core consumer prices excluding volatile fresh food rose 3.6% year-on-year in October, slightly above analysts’ expectations.
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The reading marked the fastest pace since 1982, although it remains below the dizzying 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 hikes.”
“Price increases have continued for items closely related to everyday 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 taking over energy bills, which have soared since Russia invaded Ukraine in February.
“Policies targeting energy and food, which are the main causes of rising prices” are included in the relief measures, Matsuno said pledging to “adopt the supplementary budget as soon as possible”.
Darren Tay, Japanese economist at Capital Economics, told AFP that the impact of inflation on the average consumer was “very real”.
Prime Minister Fumio Kishida responded with an “aggressive” stimulus package because “he knows his electorate is not too happy with the price hike”, Tay added.
Excluding energy prices, October inflation was more moderate at 2.5%, but still higher than in September.
The main consumer price index (CPI) has now risen for 14 consecutive months, putting pressure on the Bank of Japan to change its longstanding monetary easing policies.
The US Federal Reserve and other central banks have raised interest rates sharply this year to fight inflation.
But Japan, which since the 1990s has oscillated between periods of sluggish inflation and deflation, has bucked the tide and continues to keep interest rates ultra-low as it tries to revive the economy. sluggish economy.
Although inflation is now above the 2% targeted by the Bank of Japan over the past decade, it sees recent price increases as temporary and says there is no reason to change course.
The radically different approaches taken by the BoJ and the Fed have caused the value of the yen to fall against the dollar this year, from around 115 yen to the dollar in March to 140 on Friday, after hitting a 32-year low of 151 yen last year. month.
But with the bank watching inflation closely, Tay added: “I still don’t think it’s enough for them to change their policy at this point.”
One reason is that the latest growth data from Japan, released on Tuesday, showed a surprise contraction in the world’s third-largest economy in the July-September quarter.
“It makes it very clear to the bank that the economy is actually on much more fragile footing than they would have otherwise imagined,” Tay said.
“The other thing is that the global economy will probably go into recession next year, in the first half of the year,” he added.
“We are essentially looking at very weak economic conditions overall, and the Bank of Japan will not risk further jeopardizing the economy by tightening monetary policy at this stage.”