Japan’s core consumer inflation hit a 40-year high in October

The global financial situation continues to suffer following the two years of COVID-19 pandemic, and even now, the damage that was done to the economy is still only being discovered, while the actual recovery is still far in the future. The latest example of this came from Japan, which saw a strong surge of its core consumer inflation. According to the data from October 2022, the core consumer inflation has climbed up to a 40-year high.

The main reasons for this are believed to be the weaker currency and the growing pressure on import costs. Despite this being the case, the central bank of Japan decided to stick to the ultra-low interest rate policy, essentially shrugging off the mentioned issues.

Japan sees a CPI increase of 3.6%

The conclusion that the core consumer inflation has surged came from the national core consumer price index (CPI). According to the metric, the CPI has increased by 3.6% from last year, exceeding the expectation that predicted a 3.5% gain in October and a 3% gain in September of this year.

The last time this happened was in 1982, and back then, it was sparked by the Middle East crisis, which was caused by the Iran-Iraq war. At the time, crude supplies were disrupted, and energy prices skyrocketed, affecting the entire world. This time, the Index is once again seeing the rise, although it should be mentioned that things like volatile fresh food prices were excluded in favor of petroleum products.

The rise was used as a confirmation of inflation which was far above the 2% target that the Bank of Japan predicted, and it represents the seventh consecutive month when an increase was noted.

Economists do not expect rate hikes in Japan

According to economists, it is unlikely that the BOJ will join other central banks around the world which have introduced rate hikes. According to their assessment, the bank will try to avoid it despite the inflation acceleration, as it execs the inflation to fade as soon as import costs stop driving it. In other words, the bank will likely try to weather the storm and hope for the best.

The biggest issue right now is that the restrictions on foreign supplies have pushed the prices of imported food, manufactured goods, and industrial goods. As a result, the yen depreciated, and it dropped by over 20% against the dollar in 2022.

The governor of the BOJ, Haruhiko Kuroda, once again made the pledge to try and maintain monetary stimulus in order to secure wage growth, as well as sustained inflation stability.

For the time being, the economy remains quite fragile as the recovery from COVID-19 is taking place, but even with the situation in Japan being the way it is, it is still quite modest compared to other developed countries, which are suffering much greater consequences.