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Tokyo reaches 4% inflation, the highest in four decades

2023-01-11T05:08:11.559Z


The data anticipates a rise in prices in Japan, which maintains an ultra-expansive policy The Tokyo Consumer Price Index (CPI) exceeded analysts' forecasts and reached 4% year-on-year in December, its highest level in four decades, the Japanese National Statistics Office reported on Tuesday. The economic indicator of the Japanese capital is used as an advanced barometer of what will happen in the rest of the nation, which since 2022 has been suffering enormous inflationary pressure cau


The Tokyo Consumer Price Index (CPI) exceeded analysts' forecasts and reached 4% year-on-year in December, its highest level in four decades, the Japanese National Statistics Office reported on Tuesday.

The economic indicator of the Japanese capital is used as an advanced barometer of what will happen in the rest of the nation, which since 2022 has been suffering enormous inflationary pressure caused by the increase in the costs of raw materials and fuel, as well as by the weakness of the yen against the dollar.

The higher cost of living has raised investors' hopes that the country will toughen its ultra-expansionary policy throughout the year.

However, the authorities of the central bank do not seem, for the moment, in favor of applying a turn in the policy that has marked the Japanese economy for years.

Interest rates remain around 0%.

According to data published this Tuesday by the Government, in December, for the seventh consecutive month, prices in the capital city have exceeded the 2% inflation target set by the Bank of Japan.

Headline CPI inflation in Tokyo (excluding fresh food) exceeded both November's year-on-year rise of 3.6% and market forecasts of a 3.8% increase .

From the Ministry of the Interior they point out that it is due to the rise in the costs of processed food and energy, which has made most consumer items more expensive.

An official from this department said that, of the 522 products included in the CPI figures, 376 have become more expensive.

This is the highest price rise recorded in Tokyo since April 1982, when the CPI expanded 4.2% year-on-year.

For its part, core inflation, which excludes energy products and fresh food, increased by 2.7% year-to-year in December, following the trend of November, when it rose 2.5% year-to-year.

For Taro Saito, head of researchers at the NLI Research Institute, quoted by

The Japan Times

, "it is difficult to fully agree with the arguments put forward by the authorities."

Saito considers that inflation "is spreading", despite the fact that the central bank assures that the increase is due exclusively to the increase in the cost of exports: "Some services have not stopped becoming more expensive, such as taxis".

The price of processed foods, for its part, shot up 7.5% year-on-year in December, the fastest pace since 1976. According to a study by Teikoku Databank, a Japanese company dedicated to data analysis, the cost of food will continue to rise in 2023, after a year in which record prices have already been recorded for more than 20,800 products.

From Teikoku they expect at least 7,100 products to become more expensive over the next few months.

The prices of the products in the country had barely changed for decades, due to poor domestic demand in the face of excess supply.

With the aim of reversing this trend, the Bank of Japan has progressively adopted different measures, such as applying official interest rates of 0% or buying a very high volume of public and private assets.

In 2013, the central bank set a price stability target of 2% inflation that had been far from being reached until the war-accelerated inflationary earthquake in Ukraine struck the globe.

Bank of Japan meeting

Rising inflation has raised speculation that the banking authorities will tighten their stimulus policy again.

The release of these data comes just a week before the Bank of Japan meets again to decide its policy and update its forecasts.

Although this institution had assured that inflation is expected to be close to reaching its peak and that prices will fall by 2% during the next fiscal year, sources cited by Reuters see it as very likely that the Japanese banking authorities will revise their forecasts upwards. since strong domestic demand could keep inflation around the 2% target for a long time in the coming years.

Haruhiko Kuroda, the Governor of the Bank of Japan, however, does not seem convinced that this upward inflationary trend can continue.

Kuroda, who has held the post since 2013 and made it clear last December that he has no intention of changing Japan's ultra-loose monetary policy, maintains that the central bank will continue to ease until Japan achieves its 2% inflation target on a sustainable basis. , which would come hand in hand with an increase in salaries.

Last month, Japan's central bank surprised markets by widening the range within which it allows 10-year bond yields to fluctuate, a move investors saw as a prelude to future monetary policy tightening.

However, the authorities have given no sign that they are going to opt for that path.

Thus, Prime Minister Fumio Kishida's economic stimulus package, approved in December and endowed with 39 trillion yen (more than 275,000 million euros) of fiscal spending, could be a source of support.

The relief measures include various anti-inflation measures, ranging from discounts on electricity bills to cash grants for daycare centers.

Economists expect these subsidies to start easing inflation starting in February.

The increase in prices beyond imported products has had a negative impact on household spending, which unexpectedly fell by 1.2% in November compared to the previous year, the first contraction of that index in three months, according to shows this Tuesday other economic data published by the Government.

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Source: elparis

All business articles on 2023-01-11

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