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Japan's core inflation rose.

 


Japan’s core infla­tion rate rose to a new 41-year high of 4 per cent in Decem­ber, adding to mount­ing

Japan


mar­ket pres­sure on the Bank of Japan to aban­don its yield curve con­trol policy that has helped main­tain ultra-low interest rates.

Bank of Japan’s 2 per cent infla­tion tar­get for the ninth con­sec­ut­ive month.

While price rises in Japan remain low com­pared with those in the US and Europe, infla­tion in Asia’s most advanced eco­nomy has gained pace due to a weaker yen and heavy expos­ure to the increas­ing cost of impor­ted com­mod­it­ies.

Japan’s cent­ral bank defied mar­ket pres­sure and main­tained its ultra-loose mon­et­ary policy, arguing that wage growth was not strong enough to achieve its infla­tion tar­get sus­tain­ably.

Uniqlo owner Fast Retail­ing and other large com­pan­ies have in recent weeks announced plans to raise wages sharply, fuel­ling hopes that rising prices could finally drive salar­ies higher in a coun­try that has wrestled with three dec­ades of price stag­na­tion.

But eco­nom­ists remain divided on whether the wage increases are a one-off, and wider infla­tion­ary pres­sures are expec­ted to sub­side after gov­ern­ment curbs on gas and elec­tri­city prices take effect.

«It’s highly pos­sible that this Decem­ber year-on-year rise in core infla­tion was the peak,» said Takahide Kiu­chi, exec­ut­ive eco­nom­ist at Nomura Research Insti­tute.

Higher infla­tion and recent tur­moil in the Japan­ese gov­ern­ment bond mar­ket had raised mar­ket expect­a­tions that the

BoJ would pivot from its mon­et­ary eas­ing pro­gramme by fur­ther loosen­ing its yield tar­get or abandon­ing the policy alto­gether.

The cent­ral bank deployed the equi­val­ent of about 6 per cent of Japan’s gross domestic product over the past month on buy­ing bonds to try to hold yields within its tar­get range.

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Comments

  1. Amanda21 January 2023 at 12:45

    It will be interesting to follow what happens in Japan with wages and prices. Will both rise soon? Will none?

    ReplyDelete
    Replies
    1. Jon21 January 2023 at 13:45

      I think that Japan's core inflation will start to go down from next month. I don't see it rising anymore after all that is happening in the market.

      Delete

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