TOKYO: Japanese inflation hit a four-decade high in October, stimulated by high energy prices and a weak yen, increasing pressure on the central bank to leave its very loose monetary policies.
According to data released by the government, basic consumer prices except volatile fresh food increased by 3.6 percent on-year last month, slightly higher than analysts’ expectations.
It is the fastest inflation pace since 1982, although it remains at the exorbitant levels that have pounded the United States and other countries.
Reacting to the latest data, chief secretary Hirokazu Matsuno told journalists that the government must protect people’s livelihoods from rising prices.
Daily Use Items’ Prices Rise Due to Weaker Yen and Raw Materials
He said that prices of items of daily use such as food and utilities are rising due to a weaker yen and the increasing prices of raw materials.
The government said in October it would consume $260 billion on an economic stimulus package that include support for energy bills, which have increased after the Russian attack on Ukraine in February.
Chief secretary further said that relief measures include policies regarding food and energy, which are the basic causes of inflation. He pledged to pass a huge budget soon.
Darren Tay, Economist at Capital Economics, told AFP that the inflation was really affecting the average consumers.
He added that the prime minister Fumio Kishida has responded with an a big economic stimulus package as he knows that people were upset with rising inflation.
Without taking into account the energy prices, last month’s inflation was a more modest as 2.5 percent, but still surpassing the September’s benchmark.
CPI Has Risen for Fourteen Straight Months
The basic consumer price index (CPI) has now risen for fourteen straight months which was putting pressure on the Bank of Japan to move away from its old monetary easing policies.
The US Federal Reserve and other central banks in the world have strikingly hiked interest rates this year to deal with inflation.
But Japan, which since the 1990s have swung between periods of lethargic inflation and deflation, has acted contrary and kept rates at very low levels. Because it wanted to kickstart its sluggish economy.
Although inflation is now higher 2 percent targeted by the central bank for the past decade, it thinks the recent inflation as temporary and says there is no reason to change the policy.
The very different approaches taken by the Federal Reserve and Bank of Japan have brought down the Yen’s value against the greenback this year. The level in March was 115 yen per dollar but it is now 140 on Friday. Even it hit the 32-year low level of 151- last month.
Policy Change is Difficult
Tay said that when the central bank was closely observing inflation, it is difficult that the policy will be changed at this juncture.
Another important reason is that Japan’s latest growth data, released this earlier this week, showed an astonishing shrinkage of the economy—third largest economy in the world— in the period between July and September.
According to Tay it showed the bank that the economy is on more instable footing than they expected. While, the world economy is possibly going to enter a recession period in the first half of 2023. — APP/AFP
