Changes in banking system and inflation at record high in Japan
2023.02.24 02:06
Changes in banking system and inflation at record high in Japan
By Ray Johnson
Budrigannews.com – Friday’s data showed that consumer inflation in Japan rose as expected in January. This was due to rising commodity costs and strong local demand. This puts more pressure on the Bank of Japan to possibly tighten policy as it goes through a leadership change.
The increased in January, which did not include volatile items like fresh food, by 4.2%, up from 4% the month before and in line with market expectations.
Including volatile items, the increase in January was 4.3%, up from 4% the month before. Additionally, the index was at a 41-year high.
Japan’s inflation has been trending at over 40-year highs for the fourth month in a row, as the country struggles with more expensive commodity imports. In recent months, rising costs of fuel and utilities have been the primary cause of inflation, and this pattern continued in January.
In January, fuel and utility prices increased by 14%, while gas prices increased by 24.3 percent.
During the month, food prices increased by over 7%, with fresh food accounting for the majority of the increase.
As the war between Russia and Ukraine disrupted global commodity markets, Japan’s severe reliance on imports of food and fuel was the primary cause of rising inflation.
Additionally, the country saw an increase in the cost of imports as a result of the sharp decline in the in 2022, which is currently experiencing renewed pressure.
The current reading of higher inflation puts additional pressure on the to begin tightening monetary policy this year. Markets are now awaiting Kazuo Ueda’s speech as the BOJ’s nominee for governor to get additional clues about how monetary policy will proceed.
Ueda must balance maintaining relatively stable growth while steering the Japanese economy through rising price pressures.
The Japanese economist, who was a surprise choice for the job, has said so far that he will use data to change the bank’s strict controls on the yield curve.
After Friday’s inflation reading, the yen gained 1%.
