Inflation in Japan continued to accelerate in January, to 4.2% a year (excluding fresh produce), the highest since September 1981, according to data released Friday by Japan’s Ministry of the Interior. This rise in prices is slightly lower than expected by economists (+4.3%), after +4% in December.
Expected effects of anti-inflationary measures in the near future
Consumer prices have skyrocketed in the country since last spring in the wake of rising energy prices linked to the war in Ukraine, which has also pushed up bills for food and durable goods. Excluding energy prices, inflation in January also picked up again (3.2% from 3% in December), according to ministry data. Economists, however, expect consumer price inflation to slow sharply from February, when the effects of the Japanese government’s anti-inflation measures, including subsidies on electricity and gas bills, begin to wear off.
Since last April, inflation in the country has exceeded the Bank of Japan’s target (2% excluding fresh produce), but this price increase is mostly imported inflation that does not satisfy the BoJ, which still believes it will slow down in 2023. The BoJ thus maintained its short-term negative rate in January at -0.1% and did not increase the yield ceiling for the Japanese 10-year bond that it tolerates, although it had raised it by surprise to 0.5% last month. earlier, which had revived speculation about an upcoming monetary adjustment on his part.
Below 2% in a year
The current BoJ governor, Haruhiko Kuroda, who has been leading an ultra-accommodative monetary policy for 10 years that has caused the yen to fall against the dollar in recent months, will be replaced in April by economist Kazuo Ueda, appointed last week by the japanese government. Speaking for the first time before the Japanese Parliament on Friday, Kazuo Ueda called this policy “appropriate” and indicated his intention to continue it immediately.
He said he expects inflation to drop back below 2% by the middle of the 2023/24 fiscal year, which begins on April 1. His mission promises to be dangerous, as the BoJ’s policy seems increasingly unsustainable in the world context of high inflation and rate hikes, and it does not seem easy to get out of it without damaging the Japanese economy. This rebounded painfully in the fourth quarter of 2022 thanks to household consumption and the return of foreign tourists, but it remains fragile.
In mid-January, the BoJ raised its inflation forecast for Japan slightly for the current fiscal year 2022/23 (ending March 31), to 3% from 2.9% previously, but left its forecast unchanged for 2023/24, at 1.6% It also raised its inflation forecast for 2024/25 to 1.8% from 1.6% previously.
Source: BFM TV
