Japan is experiencing an unprecedented level of inflation in 40 years

Consumer prices in Japan have risen to an unprecedented level since 1982, in the wake of a decline in the yen’s exchange rate against the dollar, which has led to a rise in the cost of imports and a significant increase in energy prices.

Japan’s inflation rate was 3.6 percent in October on an annual basis (excluding fresh products), according to data released today, slightly higher than the expectations of economists polled by the Bloomberg agency (3.5 percent). , up from 3 percent in September.

Inflation becomes more contained (to 2.5%) if energy prices are not taken into account, but remains higher than that recorded in September due to the rise in the prices of other products, especially food.

Inflation in Japan has been above the target set by the central bank since April (2% excluding fresh products), but the “cost inflation” driven by energy and food price increases does not satisfy the institution, which still believes that the conditions for tightening monetary policy in the country.

This big difference between the Bank of Japan’s monetary policy and the significant tightening in other advanced economies, led by the United States, led to a decline in the price of the yen against the dollar and thus to an increase in the cost of Japanese imports.

Japan’s trade deficit led to a 0.3 percent decline in GDP in the third quarter compared with the previous quarter, according to preliminary data released on Tuesday.

However, economists believe that the recent rise in the yen and the decline in global energy prices will allow Japan’s trade deficit to narrow in the fourth quarter by quest’year.

Inflation is also expected to ease from early 2023, with the introduction of a measure by Prime Minister Fumio Kishida’s government to reduce Japan’s energy bills in January.

At the end of October, the BoJ raised its inflation estimate for the 2022/23 fiscal year which will end at the end of March to +2.9% (+1.8% excluding fresh products and energy).

However, it expects it to fall to 1.6% in 2023/24 and remain at this level in 2024/25.

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